YEARS OF INSPIRATION. Numbers that make all the difference. ANNUAL R EPORT

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1 Numbers that make all the difference. ANNUAL R EPORT 2013

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3 Numbers that make all the difference. As a banking institution, numbers are part of our everyday lives. We live numbers, breath numbers and work with numbers to give them a sensible value for our respected clients and stakeholders. We don t see numbers simply as numeric characters, they are a bundle of shades that changes the color in one s life and makes all the difference.

4 Letter of Transmittal All Shareholders of Bangladesh Bank Bangladesh Securities & Exchange Commission Registrar of Joint Stock Companies & Firms Dhaka Stock Exchange Limited Chittagong Stock Exchange Limited Dear Sir(s), ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 We are pleased to enclose a copy of the Annual Report together with the audited financial statements including consolidated and separate balance sheet as on 31 December 2013, profit and loss account, cash flow statement, statement of changes in equity, liquidity statement for the year then ended, and a summary of significant accounting policies and other explanatory notes thereto of (the Bank) and its subsidiaries for your kind information and record. Financial statements of The Bank comprise those of Conventional Branches, Islamic Banking Branch, one overseas BranchMumbai, India and Offshore Banking Unit while consolidated financial statements comprise financial statements of The Bank and its five subsidiaries namely AB Investment Limited (ABIL), AB Securities Limited (ABSL), Cashlink Bangladesh Limited (CBL), AB International Finance Limited (ABIFL) and AB Exchange (UK) Limited (ABEL). Yours Sincerely, Mahadev Sarker Sumon FCA Company Secretary

5 Y2013 Highlights BDT 2.03 Earnings per Share Y2012: BDT 2.89 BDT Net Assets per Share Y2012: BDT Up 6% Equity Y2012: BDT 16,034 mn Y2013: BDT 16,940 mn Up 20% Assets Y2012: BDT 173,842 mn Y2013: BDT 208,006 mn Up 16% Deposits Y2012: BDT 140,026 mn Y2013: BDT 161,846 mn Up 32% Loans Y2012: BDT 106,066 mn Y2013: BDT 140,121 mn 11.82% Cost of Fund Y2012: 12.07% 89 BRANCHES 8.64% Equity to Assets Y2012: 9.45% 0.53% Return on Assets Y2012: 0.88% 6.13% Return on Equity Y2012: 9.31% 235 ATMs Up 21% Operating Profits Y2012: BDT 4,363 mn Y2013: BDT 5,290 mn BDT 1.37 mn Pretax profit per employee Y2012: BDT 1.54 mn 2,179 EMPLOYEES 11 SME CENTERS 10.80% Total Capital Adequacy Ratio Y2012: 11.73% 8.95% Tier I Capital Adequacy Ratio Y2012: 9.99% Up 12.5% Paid up Capital Y2012: BDT 4,423 mn Y2013: BDT 4,976 mn 6 SUBSIDIARIES Up 25% Import Y2012: BDT 100,373 mn Y2013: BDT 125,383 mn Up 10% Export Y2012: BDT 65,782 mn Y2013: BDT 72,571 mn 407,590 NUMBER OF ACCOUNTS

6 CONTENTS Vision, Mission and Core Values Strategic Priorities 2014 AB Chronicles AB Bank Products & Services Message from the Chairman From the desk of President & Managing Director Board of Directors Composition of Board and Committees Directors Profile Management Committee (MANCOM) Economic Impact Report Risk Management Report Directors Report 2013 President & Managing Director and CFO s Statement Auditors Report and Audited Financial Statements Corporate Governance Investor Relations Citizen Charter AB Events 2013 Local Network Branch Network ATM Network SME Centers Proxy Form

7 VISION To be the trendsetter for innovative banking with excellence and perfection MISSION To be the best performing bank in the country CORE VALUES Our Compliance We consider adherence to national policies and objectives a priority for giving our customers the best financial support with corporate integrity, meaning a fully compliant bank along with involvement in social development. Our Customers We give the best priority on our customer demand and through our endless effort we assure the best satisfaction to our customers. Our Shareholders We assure the best return to our shareholders by commenced performance over a rolling year. Our Team Members We provide secure, satisfying employment, ensuring the contribution of each individual to the success of ABBL. Annual Report

8 PRIORITIES 2014 aligned and geared towards sustainable growth and service delivery growth, focusing the return to the shareholders competitive services at reasonable cost and thereby attaining excellence in banking operation training and development based on riskadjusted returns requirements the financial, social and ecological systems Annual Report

9 AB CHRONICLES Certificate of Incorporation December 31, 1981 First meeting of the Board of Directors February 05, 1982 Commencement of Business February 27, 1982 Opening of ABIFL Subsidiary at Hong Kong November, 1995 First Foreign Branch at Mumbai, India April 06, 1996 Opening of the Islamic Banking Branch December 23, 2004 Branchingout Opening of Principal Branch January 16, 1986 First Branch in Chittagong Division (Agrabad Branch) September 19, 1982 First Branch in Sylhet Division (Dargha Gate Branch) May 27, 1983 First Branch in Khulna Division (Khulna Branch) March 15, 1984 First Branch in Rajshahi Division (Bogra Branch) July 25, 1984 First Branch in Barisal Division (Barisal Branch) October 07, 1986 First Branch in Rangpur Division (Saidpur Branch) July 19, 1986 Listing with Dhaka Stock Exchange (DSE) December 28, 1983 Publication of Prospectus for IPO May 05, 1984 Subscription for Share starts June 25, 1984 Listing with Chittagong Stock Exchange (CSE) January, 1996 Online share transaction in CDS May 07, 2006 Opening of Merchant Banking Wing (MBW) November 02, 2002 Incorporation of AB Bank Foundation November 03, 2003 Security Custodial Service License January 22, 2007 Incorporation of AB Investment Limited (ABIL) December 24, 2009 Launching of ATM April 12, 2002 Launching of Visa Card December 23, 2004 October 19, 2009 New Logo Launch January 01, 2008 Opening of AB Bank Training Academy October 07, 2008 Customer Service Desk placed at Branches November, 2008 First SME Center opened (at Principal Branch) March 29, 2009 Primary Dealership License December 08, 2009 Offshore Banking Unit December 06, 2009 Incorporation of AB Exchange (UK) Limited June 03, 2010 Incorporation of, Myanmar Rep. Office December 10, 2010 Launching of Internet Banking October 24, 2011 Business Automation MISYS Rollout (1st Phase) March, 2007 Islamic Banking Software Ababil Launched July 13, 2008 Mumbai Branch gets connected with Central Network April 20, 2009 Trade Innovation (TI) Module Roll Out (completed) April 27, 2009 Disaster Recovery Site (DR Site) starts operation April 28, 2009 Automated Cheque Requisition System May 04, 2009 SMS Banking Services August 10, 2010 Cheque truncation & automated clearing process October 07, 2010 Internet Banking Services November 25, 2010 Electronic Fund Transfer (EFT) February, 2011 Automation of Credit Information Bureau (CIB) August 25, 2011 Automation for Offshore Banking December 06, 2012 AntiMoney Laundering Solution January 01, 2013 Annual Report

10 PRODUCTS & SERVICES Corporate & Structured Finance Term Loan Time Loan Trade Finance Trust Receipt Working Capital Bill Discounting Syndication Arrangement Agency Function Syndication Participation Equity Financing & Arrangement Corporate Advisory Service Small & Medium Enterprise (SME) Loans Treasury and Foreign Exchange Products Money Market FX Market Service Products 24 hour ATM access Online Banking SMS Banking Internet Banking Exchange Houses SWIFT Islami Banking Deposit Products AlWadiah Current Deposit Mudaraba Savings Deposit Mudaraba Special Notice Deposit Mudaraba Term Deposit Mudaraba Pension Deposit Scheme Mudaraba Quarterly Profit Paying Scheme Mudaraba Probable Millionaire Deposit Scheme Mudaraba Hajj Deposit Scheme Mudaraba Monthly Profit Payment Deposit Scheme Mudaraba Cash Waqf Deposit Mudaraba Marriage Savings Deposit Scheme Investment Products BaiMurabaha BaiMuajjal BaiMuajjal (TR) HirePurchase under Shirkatul Melk (HPSM) Murabaha PostImport (MPI) Quard against MTDR Retail Products Personal Loan (Unsecured) Personal Loan (Secured) Home Loan Education Loan Auto Loan Debit Card Deposit Accounts Savings Account MaxSaver SmartSaver Current Account Progati Special Notice Deposit Fixed Term Deposit Foreign Currency Account NFCD RFCD School Banking Family Savings Plan (FSP) Double Deposit Scheme (DDS) Monthly Savings Deposit Scheme (MSDS) Monthly Income Deposit Scheme (MIDS) Millionaire Savings Account (MSA) Annual Report

11 Message from the Chairman Bismillahir Rahmanir Rahim Assalamualaikum Distinguished Shareholders, It gives me a great pleasure and honor to welcome you Limited. On behalf of the Board of Directors of the Bank and on my behalf, I would like to extend a warm welcome to all of you who are present today and also to all distinguished shareholders of our Bank. It is your trust, faith, cooperation and understanding without which it would not have been possible for us in AB to achieve what the Bank has earned under a most trying Annual Report

12 Message from the Chairman circumstances in The Bank is committed to deliver utmost quality of services for our valuable customers, shareholders and stakeholders as a whole. A long 32 years of enduring journey has made AB Bank one of the household names among the top Private Sector Commercial Banks in the country. We believe that it is our passion for service and quality, customer centricity, innovation and value creation and above all our courage and humility which distinguishes us as a bank of choice and trust. The result of our hard work and the collective wisdom brought us; we are now as a leading Bank in corporate business, trade finance & International trade in Bangladesh. We have all the more reasons to choose this year s tagline as 32 Years of Inspiration to show our respect and appreciation to all of our esteemed stakeholders. The global economy is still on an arduous climb out of the great recession of The US economy shows signs of recovery, with growth and employment picking up buoyed by strong private demand, EU countries are still mired in stagnancy with countries such as Italy, performer with low unemployment and strong exports. Consequently, the Euro area is just crawling out of recession. The latest IMF World Economic Outlook (WEO) suggests that the scenario will result in a rebound in the world economy compared to the minor setback in 2013, with global growth at 3.6 percent in 2014 compared to 2.9 percent in 2013 and trade growth is expected to be 4.9% in 2014, whereas it was 2.9% in The IMF projection on global economy augurs well for the Bangladesh economy which is increasingly relying on export expansion for job creation and income growth. Excess liquidity and low private sector credit growth and the political turmoil seen in the second half of the year seriously affected most entities in all sectors of our economy that eventually affected the profitability of the Banking sector in Excess liquidity in the banks rose by 73.8 percent at the end of 2013 over the corresponding period of 2012; however, in case of Direct Foreign Investment (DFIs) a negative growth is observed for the same period as regards excess liquidity situation. Low private sector demand for credit due to political turmoil and also the ceilings imposed on banks investment in the share market by Bangladesh Bank for a very prudent reason have also contributed to high liquidity in the banking system. Though credit to the public sector has increased by percent in 2013 compared to 8.9 percent in 2012, credit to the private sector increased only by 11 percent in 2013 as opposed to the target of 16.5 percent for Lower credit to the private sector reflects a low appetite by the private sector which is influenced by recent political turmoil, weak infrastructure, and low investment opportunities, Annual Report

13 Message from the Chairman scarcity of direct foreign investments, inadequate infrastructural development and continued energy crisis. imbalances; business monitoring and risk management platform was strengthened. Like past, Bank also concentrated on valuedriven CSR activities. At the end of 2013, the Bank was able to boost up the operating profit registering 21 percent growth. Percentage of Classified Loans stood at 3.37 where the industry average was 8.93, Total Assets of the Bank increased to 20,801 crore from 17,384 crore registering an increase Bank formed a separate Risk Management Committee in the Board supported by a Risk Management Division headed by a Chief Risk Officer (CRO) who is a very senior banker (DMD). We believe that it is the dedication, professionalism and desire to achieve that drives the AB Family to succeed in this difficult year for the banking sector. In spite of the above, we look forward to achieving larger targets and strengthening our position in the upcoming years. I believe that in the coming days, our innovative and creative employees, directed by our efficient Management Team, will ensure delivery of more consumeroriented banking products and services through continuous efforts and set a definite benchmark for the entire banking industry. On behalf of members of the entire AB family, I would strategic viewpoints of the Sponsors, their trust and support to the Board of AB which has enabled us to battle through various challenges that have come its way in the last 32 years. I express heartfelt thanks and gratitude to you for your unfailing faith and trust in us. Your support and direction along with the faith and trust of our clients have been the prime driving force behind the Bank in times of political, business and economic challenges throughout its journey. I would also like to express my deep gratitude to our respected Regulators, Shareholders, Customers, Wellwishers, Print & Electronic media for their continuous support and guidance in enabling AB to sail through the challenges experienced by the banking sector. Wishing good health, peace and prosperity to all of you. Thank you all Assalamualaikum M. Wahidul Haque Chairman Annual Report

14 From the desk of President & Managing Director Banks today are, more than ever, a key element for economic development; both due to the value that their ideas and projects contribute to the society and the new markets and business environments which their initiatives generate. The importance of creating and carrying out these projects has a multiplying impact on the economy; promoting the creation of jobs, technological innovation and synergies between the different agents making up the economic and social environment. In the entrepreneurial ecosystem, AB Bank offers a superb environment to implement banking solutions. The bank is committed to lead the transformation of conventional business projects accelerating the innovative nature of their talent; bringing together professionals, and creating global entrepreneurship promotion programs. AB turned 32 in 2013 and it has been unquestionably a difficult year for AB and the banking industry as well due to political turmoil. Some traditional problems like structural reforms, tightened monetary policy and downtrend in investment market, labor unrest, and weak infrastructural facility hit the banking industry hard. In this backdrop, our main focus was to maintain the asset quality. In spite of such negative trends, we continued to enrich our market share. Our deposits increased by 16 percent where the loans and advances growth rose by 32 percent. In case of international trade, both Import and Export business marked rise by 25 percent and 10 percent respectively. After my six years of journey with AB, when I was approached about taking this position, I had some primary interests: expanding the market share, working Annual Report

15 From the desk of President & Managing Director capabilities, and working with experienced & hard working people. I have observed and appreciated that a culture has been set in AB to go for valuedriven business rather than to run for profit only that will make AB worthy of its past. No wonder that it is now one of the leading and successful Private Sector Commercial Banks of the country becoming an icon of sustainable institution for our entire stakeholders as it focused on Again, from the tightened guidelines and weak business sectorwise growth, it was very difficult to maintain asset quality. In 2013, the classified loan increased to BDT 472 crore from last year s BDT 352 crore as well as the nonperforming loans increased to BDT 522 crore from BDT 403 crore. Our team worked to sustain the capital, as a result the yearend capital adequacy ratio stood in a strong position of percent where the regulation is only to maintain 10 percent. Earnings per Share reached at BDT I believe that it is the credible achievement, a strong team and absolute commitment to which spur the AB Family to succeed in this adverse scenario. AB s visionary policy was always to expand business AB s UK operation through AB Exchange (UK) Ltd. is not moneymaking yet, the Hong Kong operation, AB International Finance Limited, and Mumbai branch are doing quite well. The compliance with national policies and regulatory highly competitive, we built strong reputation to our present and potential clients by providing business solution to them with new products and facility. In this year AB strengthened its alternative delivery channels, Consumer Banking Business, SME business. We think client s confidence is a sine qua non for sustainable future business growth. That s why we treat the clients as our business partner. AB believes that the Corporate Social Responsibility is the first and foremost commitment to contribute to the society for improving the lives of its people, particularly for that segment of the people who are underprivileged and less fortunate in terms of basic needs and remain alongside as sincere benefactor of the country s rich heritage of arts, culture and sports. Another thing I environmental friendly work atmosphere within AB. We built conscientiousness among staffs regarding energy usages, paper usages, and carbon emission reductions in every steps. We believe it s not the pressure but culture we have established. I believe that employees are the key to our success. The quality of their work forms the basis for performance and client trust. We continuously invest in training and development for our staff as well as in increasing our attractiveness as an employer to win and retain the best talent. We consider the diversity of our employees to be a competitive advantage, as this allows us to respond very individually to different clients and their specific needs. Moreover, diversity is an important source of creativity and innovation. The economic outlook for the foreseeable future is not investments and our focus rather than look to grow every business. More than ever, we need to focus on costs. This will be the strategic battleground for the Financial Service Industry in the future and we must do things differently if we are to thrive. We are going to undertake a comprehensive, endtoend review of our operations, unprecedented in scope and detail. We have closely examined the external environment, now and in the future, looking at the economic context, the needs of our customers and clients, regulatory and stakeholder expectations, and the competitive perspectives. I believe it is the right strategy, balanced business mix, appropriate culture and the dedicated team that we have can drive the Bank to continued growth and take advantage of changes in the market place. I would like to thank regulatory agencies for their continued supports and valuable guidelines. I express my deep gratitude towards the Shareholders, Customers, and all the Stakeholders for their faith and trust; which is the core enduring source of our bank in any critical crisis. I am grateful to the AB Family for their quintessential dedication in all success stories of AB. Thank you. Shamim Ahmed Chaudhury President & Managing Director Annual Report

16 Board of Directors Sitting from left (First row) Salim Ahmed, M. Wahidul Haque Sitting from left (Second row) Syed Afzal Hasan Uddin, Shishir Ranjan Bose, FCA, Runa Zakia Shahrood Khan, M. A. Awal, Prof. Dr. M. Imtiaz Hossain Standing from left Gholam Sarwar, B. B. Saha Roy, Md. Anwar Jamil Siddiqui, Faheemul Huq, Feroz Ahmed, Md. Mesbahul Hoque, Shamim A. Chaudhury

17 Composition of Board and Committees BOARD OF DIRECTORS Chairman M. Wahidul Haque Vice Chairman Salim Ahmed Directors M.A. Awal Faheemul Huq, BaratLaw Md. Mesbahul Hoque Md. Anwar Jamil Siddiqui B. B. Saha Roy Independent Director Shishir Ranjan Bose, FCA Runa Zakia Shahrood Khan President & Managing Director 1 Shamim A. Chaudhury 2 Company Secretary Mahadev Sarker Sumon FCA EXECUTIVE COMMITTEE Chairman Salim Ahmed Members Md. Mesbahul Hoque B.B. Saha Roy Faheemul Huq, BaratLaw Md. Anwar Jamil Siddiqui Secretary Mahadev Sarker Sumon FCA AUDIT COMMITTEE Chairman M. Wahidul Haque Members Shishir Ranjan Bose, FCA B.B. Saha Roy Md. Anwar Jamil Siddiqui Secretary Mahadev Sarker Sumon FCA SHARIAH SUPERVISORY COMMITTEE Chairman Jb. Shah Abdul Hannan Vice Chairman Member Dr. Md. Harun Rashid Jb. Muhammad Musa Jb. M. Wahidul Haque Jb. Shamim A. Chaudhury Member Secretary Jb. Mukhlesur Rahman ASSET LIABILITY COMMITTEE Chairman Shamim A. Chaudhury Member Sajjad Hussain 3 Moshiur Rahman Chowdhury Abu Hena Mostafa Kamal Mahadev Sarker Sumon FCA Salma Akter Member Secretary Sheikh Md. Reajul Islam Chairman Shishir Ranjan Bose, FCA Members M. Wahidul Haque M. A. Awal Runa Zakia Shahrood Khan Secretary Mahadev Sarker Sumon FCA 1 Mr. M. Fazlur Rahman left AB on January 01, Effective from February 23, Joined AB on February 02, 2014 Annual Report

18 Directors Profile M. Wahidul Haque Chairman Salim Ahmed Vice Chairman Feroz Ahmed Director Mr. M. Wahidul Haque joined the Board of Directors of AB Bank Limited on December 12, 2007 as Director. He was unanimously elected as the Chairman of the Board of Directors in July 2008 and continues to be the Chairman of the Bank. Mr. Haque is also the Managing Director of Deundi Tea Company (UK) Limited and The Noyapara Tea Company (UK) Limited both of which are UK registered companies. He had been the Chairman of Bangladesh Tea Association for six (6) years, representing tea plantation owners in Bangladesh. He is a member of the Executive Committee of Bangladesh Tea Boarda regulate tea/coffee plantations in Bangladesh. Mr. Haque also represents owner on the Board of Trustees of Plantation Employees Provident Fund, of Bangladesh (Labor Ministry). He is also a Trustee in the Tea Workers Welfare Trust constituted by the Welfare and enhancing education etc. for the tea plantation workers. He is the office bearer of the Bangladesh Employers Federation (Dhaka) as well. Mr. Haque also holds the position of the Chairman of the Board of the following subsidiary companies: Limited Limited He was a nominated Director by AB Bank Limited, in the Board of Amana Bank Limited, Sri Lanka, which is the first Islamic Bank of Sri Lanka. AB Bank has 15% equity in Amana Bank Limited. Mr. Haque has been awarded the prestigious Award for his contribution to the Tea Industry of Bangladesh in Mr. Haque is a graduate of Dhaka University and also holds a Law Degree. He is married with three daughters. Being an active participant in social activities, he also Bangladesh. Mr. Salim Ahmed is the Chairman of Elite Paint and Chemical Industries Limited. He represents one of the sponsor shareholders of AB Bank Limited. Mr. S. Ahmed became Vice Chairman on October 19, He is also the Chairman of the Executive Committee of the Board. A successful industrialist and sports enthusiast, Mr. Ahmed is also connected with various sports bodies and philanthropic Member of the Executive Body of FBCCI and also the former President of Bangladesh Paint Manufacturers Association (BPMA). Director of AB Bank Limited and also the former Vice Chairman of the Board. He is also the Vice Chairman of Elite Managing Director of Elite International Ltd., Hexagon Chemical Complex Ltd. as well as Ahmed Securities Services Ltd. among others. Apart from business activities, with various SocioCultural, Philanthropic and Sports associated with the Bangladesh Cricket Board (BCB) as its ADHOC Executive Committee Member. He is also an Executive Committee Country club, life member of Chittagong Zila Krira Sangstha and member of Chattagram Mohanagari Krira Sangstha. He is also life member of Red Crescent Society, Chittagong, Maa O Shishu Haspatal, Chittagong. Annual Report

19 Directors Profile an active member of Bangladesh Pharmaceuticals Society; and also the Chairman, Reptiles Farm Ltd. (first crocodile captive breeding farm in Bangladesh). Syed Afzal Hasan Uddin Director Faheemul Huq Director B.B. Saha Roy Director is a Director of AB Bank Limited. He graduated from King's College, London in 1993 and was called to the Bar from Lincoln's Inn, London in March Mr. Hasan Uddin is the Managing Partner of Syed Ishtiaq Ahmed & Associates, one of the prominent law firms of the country. Prior to joining Syed Ishtiaq Ahmed & Associates, he worked for the Civil Litigation Department of Price Waterhouse in London. He enrolled as Advocate of the High Court Division of the Supreme Court of Bangladesh in Mr. Hasan Uddin's area of expertise include advising clients in the areas of telecommunication, energy and power generation, mergers and acquisitions, due diligence of companies and general corporate and commercial affairs. Mr. Faheemul Huq, BarristeratLaw, a distinguished legal practitioner in the country is vastly known for his profound knowledge in Corporate and Banking Sector. Apart from his legal profession, the contribution of Mr. Huq in the policy matter of the Bank is significantly conspicuous. Mr. Huq's wide amplitude of knowledge in Banking Sector has assisted the bank in deciding various complicated issues. Gholam Sarwar Director held the position of a Director of AB Bank Limited from January 10 to July 16, 2008 and had been reappointed for the post again on December 24, He is also the Director of Pacific Industries Limited, Pacific Motors Ltd. & Therapeutics (BD) Ltd. He has about 45 years of experience in Automobile Sector. Mr. B.B. Saha Roy has completed his MBA from the renowned IBA, DU and has worked as a general manager for Berger Paints Ltd for twenty years. He currently holds the position of Managing Director and Companies. He is also the President of Bangladesh Paint Manufacturers Association. M. A. Awal Director Md. Mesbahul Hoque Director Md. Mesbahul Hoque, Director, started his career in Country's Pharmaceutical Sector in 1969 by joining May & Baker (UK) Ltd. presently known as Aventys (BD) Ltd. At present, he is the Managing Director of Therapeutics (BD) Ltd. and M. A. Awal joined in AB Bank Limited as Director on July 16, He has over 40 years of banking experience serving in senior responsible positions in different Banks including AB Bank. Prior to his Directorship, Mr. Awal served as the Advisor and also the Chief Consultant of the Bank for about three years. He is also the director of ABIFL, Hong Kong. Annual Report

20 Directors Profile Independent Director of the Board. He is also the Independent Director of AB Securities and Cash Link Bangladesh. Md. Anwar Jamil Siddiqui Runa Zakia Shahrood Khan Independent Director Shamim A. Chaudhury President & Managing Director Director Mr. Anwar Jamil Siddiqui is one of the respected directors of AB Bank Limited. His valuable contribution to the bank is highly esteemed as it is a result of his immense experience in the corporate world for over 50 years. He is also the Director of Therapeutics (BD) Ltd. and Pacific Motors Ltd. Shishir Ranjan Bose, FCA Independent Director A fellow of Institute of Chartered Accountants of Bangladesh, Mr. Bose joined on July 16, 2008 as a Director of the Board. Having 32 years of experience in the field of chartered accountancy profession, Mr. Bose also became the Chairman of the Audit Committee of the Board on July 22, He has been nominated as the Prof. Dr. M. Imtiaz Hossain Independent Director is a Depositor Director of. A Ph.D holder from the University of Manchester Institute of Science and Technology, Manchester, UK, Mr. Hossain is currently the Vice Chancellor of Islamic University of Technology, a Fellow of the Institution of Engineers, life Fellow of Bangladesh Society of Mechanical Engineers and also a life Member of National Oceanographic and Maritime Institute, Bangladesh. Runa Zakia Shahrood Khan is a Depositor Director of the Bank. She is the Founder and Executive Director of "Friendship", an Sustainable Integrated Development projects, including healthcare, relief and rehabilitation, livelihood and income generation, education and cultural preservation, in remote, unaddressed, hardtoreach riverine and Char areas. She is also an acknowledged national award winning writer of Educational Books for children. A lady with many talents, Mrs. Khan has received many international awards including The Rolex Awards in 2006, the IDB Award for women in 2008, and an Ashoka Fellowship for her innovative method for pedagogy in public primary schools and was awarded the Schwab Foundation s 2012 Social Entrepreneur award. Shamim A. Chaudhury was appointed as the President and Managing Director of on February 23, Mr. Chaudhury joined the Bank on 16th March, 2008 as Deputy Managing Director and has been promoted to the rank of Additional Managing Director effective from 20th October After completing MBA, Mr. Chaudhury started his career with American Express Bank Limited in 1980 as Management Trainee. During his over 33 years of experience, he also served in Bank of Credit & Commerce International (Overseas) Limited, Bank of Small Industries & Commerce, Union Bank of Zambia Limited, Al Rajhi Banking & Investment Corporation, CIT Financial Limited, BPB North American Financial Services from 1988 to He served in One Bank Limited as Deputy Managing Director from October 2005 to March Annual Report

21 Core Management Committee Standing from left Ahsan Afzal, Sajjad Hussain, Shamim A. Chaudhury, Moshiur Rahman Chowdhury, Mahadev Sarker Sumon FCA Annual Report

22 Management Committee Core Shamim A. Chaudhury President & Managing Director Sajjad Hussain Deputy Managing Director Ahsan Afzal Deputy Managing Director Moshiur Rahman Chowdhury Deputy Managing Director Mahadev Sarker Sumon FCA Company Secretary Extended Abu Hena Mustafa Kamal SEVP & Head of Financial Institutions & Treasury Mohammad Shamsul Islam EVP & Head of Credit Administration Management Md. Aminur Rahman SVP & Head of Human Resource (CC) Reazul Islam EVP & Head of Information Technology Enayet Afzal VP & Head of Internal Control & Compliance (Acting) Salma Akter SVP & Head of Credit Risk Management Syed Mizanur Rahman SVP & Head of Consumer Banking M. Azizul Huq Head of Islamic Banking Ifterkhar Enam Awal SVP & Head of SME Md. Azad Hossain SEVP & Relationship Manager, Principal Branch Shamima Hedayet SVP & Relationship Manager, Motijheel Branch Quazi Waseem Ahmed 1 SEVP & Head of CFD and SFD Regions Dhaka Chowdhury Manzoor Liaquat EVP & Regional Relationship Manager (Region 1) Md. Altaf Hossain EVP & Regional Relationship Manager (Region 2) Khulna Anisuddin Ahmed VP & Regional Relationship Manager Chittagong Mohammed Ishaque Chowdhury SEVP & Regional Relationship Manager (Region 1) Syed Aminul Islam SEVP & Regional Relationship Manager (Region 2) Rajshahi Md. Abdul Maleque VP & Regional Relationship Manager Sylhet Golam Mahmud Rizvi SVP & Regional Relationship Manager 1 Joined AB on March 18, 2014 Annual Report

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24 CORPORATE

25 CORPORATE STRUCTURE AB Horizon Subsidiaries with AB Bank Limited's shareholding AB Investment Ltd. (ABIL) :99.99% AB Securities Ltd. (ABSL) :99.71 % Local CashLink Bangladesh Ltd. (CBL) :90.00 % Arab Bangladesh Bank Foundation (ABBF) : 99.60% [Philanthropic Organ of AB] Foreign AB International Finance Ltd. (ABIFL) :100% AB Exchange (UK) Ltd. :100% Custodian FunctionLocal Islamic Banking DivisionLocal OffShore Banking Unit (OBU) Separate Operations Mumbai Branch, IndiaForeign Annual Report

26 are focused on ensuring fairness, transparency and line with guidelines of Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) in this regard. While pursuing the goal of Shareholders value addition, Bank attached utmost importance to setting up of welldefined compliance oriented Board of Directors of AB comprises of 14 (fourteen) Members. This is in conformity of Bangladesh Bank guidelines and also the Articles of Association of the Bank. Board includes three Independent Directors in pursuance with respective regulatory requirements respectively. Board of Directors of AB is a professionally run forum having Members from various backgrounds and professions. Board is the apex body for strategy and policy formulations and for taking decisions on business, operational and financial matters besides ensuring compliance and risk management of the Bank. This is run professionally following the guidelines of Bangladesh Bank and also within the authorities of the Memorandum and Articles of Associations of the Bank. Management of the Bank operates within the policies, guidance and limits approved by the Board. Board holds meeting regularly and sits at least once in a month. Executive Committee of the Board is formed following the guidelines of Bangladesh Bank in this respect and comprises of 7 (seven) Members nominated by the Board. ViceChairman of the Board is the Chairman of the Executive Committee. Executive Committee operates within the Terms of Reference (TOR) set by the Board. Audit Committee of the Bank has been formed in strict compliance of Bangladesh Bank guidelines and accordingly comprises of 5 (five) Members. Chairman of the Audit Committee is the Independent Director of the Board. Company Secretary acts as the Secretary of the Committee while other Members of the Management attends the Committee Meeting on invitation only. Audit Committee has set Terms of Reference as contained in Bangladesh Bank guidelines. Risk Management Committee (RMC) of the Bank has been formed in compliance of Bank Company (Amendment) Act2013, sec15 Kha, and subsequent BRPD Circular # 11 Dated October 27, RMC is formed by 5 (five) Board Members and Chairman of the Board is also act as the Chairman of the RMC. Function of implementation and to accomplish Board functions accurately related to risk. Shariah Council of the Bank has 7 (seven) Members for overseeing and strategic guidance of the Islamic Banking business. The Council comprises of scholarly persons and operates as per the assigned responsibilities. Annual Report Regulatory compliance disclosure Bank has been following related guidelines on submission of Quarterly, Halfyearly and Yearly financial statements and other statutory reports. Any significant development in the business is forthwith disclosed through the adherence of proper rules/guidelines/directive in the form of price sensitive declarations. Bank also ensures submission of returns to regulatory bodies in fullcompliance of the requirements and appropriate disclosures ensuring transparency and accountability. Board of Directors ensures adequate disclosures for the Shareholders and other stakeholders through the Annual Report or other specific disclosures if required. Delegation of Power Management of the Bank has been empowered with appropriate finance and business decision making authorities as per the guidelines of Bangladesh Bank. Credit Committee of the Bank has been delegated with the authority for Credit approval up to a given limit. Board has approved a Procurement Manual to cover the purchase of goods and services and other procurements of the Bank. approved by the Board from time to time with levels of authority and process delegation varied across the Bank. Bank also has well empowered ALCO to deal with funding and treasury matters. President & Managing Director is the Executive Head of the Bank. Bank has approved (Organogram) upto the Unit Level with clear functional segregation and also segregation of processing functioning (Front and Back office) authorities. This ensures Core Risk Management compliance across the Bank. Bank's functions and plans also consider various regulatory limits and restrictions to be risk compliant, as well. A Risk Management Division (RMD) has been formed incompliance with the relevant guidelines of Bangladesh Bank. Bank also has a strong SRP Team in place. In the overall, the Bank is governed by the rules, regulations, guidelines, directions and policies as applicable for the banking business and operation. Different control aspects on the basis of need, regulatory or businessare in place which includes capital adequacy, risk management, market and liquidity, anti money laundering compliance, prudential guidelines, reporting standards among others. Other operations of AB like AB International Finance Limited (ABIFL) at Hong Kong, AB Exchange (UK) Limited and the Branch in Mumbai, India are governed by the rules and regulations of the respective countries. While the two subsidiaries, AB Investment Limited (ABIL) and AB Securities Limited (ABSL), will be governed by rules and regulations of the Bangladesh Securities and Exchange Commission (BSEC) mostly. Bank has also acquired 90 percent shareholding of CashLink Bangladesh Limited (CBL) a company engaged in EFT business. This will be governed under the Companies Act besides other applicable regulatory requirements.

27 Business Plan and Achievements in 2013 Business Plan of the Bank provides for the Working Platform embodying the growth aspect, profitability, risk appetite, capital management etc. It also embodies accountability in terms of set KPI'es and acts as a roadmap for Shareholders value addition. Overall performance of the Bank in 2013 with respect to Business Plan Target is given below: BDT in Crore Operating Profit Provisions for loans and others Profit before Tax Provision for Tax Net Profit After Tax Loans and Advances Deposits Export Import Inward Remittence (USD) BGT2013 ACT ,255 15,375 7,928 11, ,012 16,185 7,257 12, Variance Amount (26) (100) (126) (68) (58) 1, (671) % 5% 43% 42% 34% 57% 13% 5% 9% 7% 7% Annual performance of the Bank for the year 2013 has been placed in the 546th Board of Directors meeting held on March 12, 2014 and Board deeply analysed the yearly performance and recommended their views by following: 1. To follow the Board approved Budget2014 strictly in order to maintain capital adequacy ratio of the Bank. 2. Investment Banking Division activities to be revamped by taking appropriate measures to get benefit from the investment already made by the Bank under this Division. Although Branch profitability is inline with Budget, Investment income was far behind and seriously impacted the bottom line outcome. This sector needs concentrated and planned focus. existing loan level and also in the overall context of approved budget for loans and deposits. 4. Branches must meet the Deposit target along with the deposit mix for the year. Board also advised to review the Deposit & Lending rate based on the current market situation and review the budget every quarter. 5. Business of ABBL Mumbai Branch, India to be monitored closely and profitability to be increased to supplement bottom line support of the Bank in future evidencing broadening of their business sectors. 6. Cost of fund is on the higher side, which needs to be looked into. In this respect, benchmrking with peer Banks was advised. 7. Cost control measures to be taken seriously by the management. 8. To watchout the asset quality and provisioning while new loans are approved. 9. Off BalanceSheet exposure to be monitored and controlled properly in order to contain risks of proper Balance Sheet Management. 10. Classified Loan (CL) to be reduced to acceptable level by the year end. Bangladesh Bank conducted the comprehensive inspection of Head Office and 09 selected Branches based on 31 December Triparty meeting among Bangladesh Bank, External Auditors and Management of Statements. External Audit External Auditors also covered potential Branches and Head Office as part of the Annual Audit Program. Auditors covered 80 percent of the risk assets. Auditors submitted a Management Report with a Special Section on the Review of Bank s Internal Control Environment of the Bank. The Report was discussed in the Audit Committee. Audit Committee referred the Report for detailed review as to compliance to the Board of Directors Meeting. Internal Control and Compliance Division (ICCD) Bank has a separate Division for Internal Control & Compliance monitoring. This Division operates independently and has given responsibilities by the Board in line with the Bangladesh Bank guidelines. Head of Internal Control & Compliance is accountable to the Audit Committee of the Board. Rating was rated by Credit Rating Agency of Bangladesh Limited (CRAB). The summary of their ratings is given below: Long Term Short Term Surveillance Rating (2013) AA3 ST2 Date of Rating Validity Date 27 March June 2015 Credit Rating Agency of Bangladesh (CRAB) has affirmed AA3 rating in the long term and ST2 rating in the short term of for the year ended December 31, 2013 (based on Audited Financials). Commercial Banks rated AA3 in the long term belongs to Very strong capacity & very high quality cohort. Banks rated `AA3 has very strong capacity to meet their financial commitments. AA3 rated banks are judged to be of very high quality and are subject to very low credit risk. Commercial Banks rated ST2 in the short term is considered to have strong capacity for timely repayment. with commendable position in terms of liquidity, internal fund generation, and access to alternative sources of funds. Compliance Bangladesh Securities and Exchange Commission (BSEC) dated 07 August, 2013) for the companies listed with the Stock Exchanges. Compliance status of the guidelines is attached in AnnexureI, II and A respectively. Bangladesh Bank also issued a guideline on 04 February, 2010 as BRPD Circular No.06 [replacing BRPD Circular No.16 dated 24th July, 2003]. Compliance of the guideline is attached in AnnexureIII. Annual Report

28 AnnexureI MEETINGS OF THE BOARD OF DIRECTORS OF AB BANK LIMITED. Total Meeting held in 2013: 30 (thirty) Director(s) Status No. of meeting attended Mr. M. Wahidul Haque Chairman 30 Mr. Salim Ahmed Vice Chairman 4 Director 14 Mr. M.A. Awal Director 25 Mr. Shishir Ranjan Bose, FCA Independent Director 20 Mr. Faheemul Huq Director 22 Director 22 Mr. Md. Mesbahul Hoque Director 22 Mr. Md. Anwar Jamil Siddiqui Director 30 Mr. B.B. Saha Roy Director 29 Director 0 Depositor/ Independent Director 18 Ms. Runa Zakia Shahrood Khan Depositor/ Independent Director 17 President & 17 (Left AB on 1st January 2014) Managing Director Executive Committee Meeting Total Meeting held in 2013: 1 (one) % of Attendance 100% 13% 47% 83% 67% 73% 73% 73% 100% 97% 0% 60% 57% 57% Remarks/ Granted Leave of absence Nil 26 (twenty six) 16 (sixteen) 05 (five) 10 (ten) 08 (eight) 08 (eight) 08 (eight) Nil 01 (one) 30 (thirty) 12 (twelve) 13 (thirteen) 13 (thirteen) Director(s) Status No. of % of Remarks/ meeting Attendance Granted Leave attended of absence Mr. Salim Ahmed, Vice Chairman, ABBL Chairman 1 100% NIL Mr. Md. Mesbahul Hoque, Director, ABBL Member 1 100% NIL Mr. M. Wahidul Haque, Chairman, ABBL, (upto December 26, 2013) Member 1 100% NIL Member 1 100% NIL Member Nil Nil 01 (One day) (upto December 31, 2013) Member Nil Nil 01 (One day) Mr. B.B. Saha Roy, Director, ABBL (with effect from ) Member Nil Nil 01 (One day) Mr. Faheemul Huq, Director, ABBL (with effect from ) Member Nil Nil 01 (One day) Mr. Md. Anwar Jamil Siddiqui, Director, ABBL Member Nil Nil 01 (One day) (with effect from ) Member Nil Nil 01 (One day) (with effect from ) Audit Committee Meeting Total Meeting held in 2013: 16 (sixteen) Director(s) Mr. Shishir Ranjan Bose, FCA, Director, ABBL Mr. M. Wahidul Haque, Chairman, ABBL Mr. M.A. Awal, Director, ABBL Mr. Salim Ahmed, Vice Chairman, ABBL (upto December 26, 2013) Ms. Runa Zakia Shahrood Khan, Director, ABBL (with effect from ) Status Chairman Member Member Member Member Member No. of meeting attended Nil % of Attendance 75% 100% 94% 75% 6% Nil Remarks/ Granted Leave of absence 04 (four) Nil 01 (one) 04 (four) 15 (fifteen) Nil Annual Report

29 AnnexureI Risk Management Committee Meeting Total Meeting held in 2013: Nil Director(s) Status No. of % of Remarks/ meeting Attendance Granted Leave attended of absence Mr. M. Wahidul Haque, Chairman, ABBL Chairman Nil Nil Nil Mr. Shishir Ranjan Bose, FCA, Director, ABBL Member Nil Nil Nil Mr. B.B. Saha Roy, Director, ABBL Member Nil Nil Nil Mr. Syed Afzal Hasan Uddin, Director, ABBL Member Nil Nil Nil Mr. Md. Anwar Jamil Siddiqui, Director Member Nil Nil Nil AnnexureII Shareholding pattern of the Bank is disclosed as below following the requirements of Section 1.5 (xxi) of SEC Notification No. SEC/CMRRCD/ /134/Admin/44 dated 07 August a) Parent/Subsidiary/Associated Companies and other related parties: N/A b) Shares held by Directors, Chief Executive Officer, Company Secretary, Chief Finance Officer, Head of Internal Audit and their Spouses and Minor Children are as follows: status as of 31st December, 2013 i) Shares held by Directors and their spouses Name of the Directors Mr. M. Wahidul Haque, Mr. Salim Ahmed, Mr. M. A. Awal Mr. Shishir Ranjan Bose, FCA Mr. Faheemul Huq, BarristeratLaw Barristeratlaw Mr. Md. Mesbahul Hoque Mr. Md. Anwar Jamil Siddiqui Mr. B.B. Saha Roy Mrs. Runa Zakia Shahrood Khan Status Chairman ViceChairman Director Director Independent Director Director Director Director Director Director Director Depositor/Independent Director Depositor/ Independent Director President & Managing Director No. of Shares 107,662 11,754,084 10,325,069 3,118 2, ,964 2,214 11,933 2,214 2,214 1,930 Nil Nil Nil % Name of the Spouses Mrs. Lutfun Nesa Mrs. Lutfunnessa Ahmed Mrs. Tahmina Salvana.0006 Mrs. Hosne Ara Awal.0004 Mrs. Buli Bose.0858 Mrs. Rokeya Sultana Mrs. Rahat Sarwar Mrs. Nargis Akhter Banu.0004 Mrs. Misty Saha Roy Mrs. Shirin Jahan Mr. Yues Marre No. of Shares 24, , ,809 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil % *Resigned on 01 January 2014 ii) Shares held by Chief Executive Officer, Company Secretary, Chief Financial Officer and Head of Internal Audit. Name Status No. of Shares President & Managing Director Nil Mr. Mahadev Sarker Sumon FCA Company Secretary & Chief Financial Officer Nil Head of Internal Audit Nil c) Shares held by top five salaried employees other than the Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer and Head of Internal Audit. Name Mr. Shamim A. Chowdhury Mr. Badrul H. Khan Mr. Moshiur Rahman Chowdhury Status Additional Managing Director Deputy Managing Director Deputy Managing Director Deputy Managing Director Executive Vice President No. of Shares Nil Nil Nil Nil Nil d) Shareholders holding ten percent or more voting interest in the company: N/A Annual Report

30 Annual Report

31 AnnexureA Status of compliance with the conditions imposed by the Bangladesh Securities and Exchange Commission Notification No.SEC/CMRRCD/ /134/Admin/44: dated 07 August 2012 issued under section 2CC of the Securities and Exchange Ordinance 1969: Report under condition no of above referred notification Condition Title Remarks No. put in the appropriate column) (if any) Complied Not Complied (i) 1.2(ii) 1.2 (ii) a) 1.2 (ii) b) 1.2 (ii) c) 1.2 (ii) d) 1.2 (ii) e) 1.2 (ii) f) 1.2 (ii) g) 1.2 (ii) h) 1.2 (ii) i) 1.2 (iii) 1.2 (iv) 1.2 (v) 1.2 (vi) BOARD OF DIRECTORS: (five) and more than 20 (twenty) Appointment of Independent Directors: at least 1/5th Independent Director means a Director Independent Director should not hold any share in the company or hold less than one percent (1%) shares of the total paidup shares of the Company Independent Director should not be a sponsor of the company and is not connected with the company s sponsors or director or shareholder who holds one percent (1%) or more shares of the total paidup shares of the company on the basis of family relationship. His/her family members also should not hold above mentioned shares in the company. Independent Director does not have any other relationship, whether pecuniary or otherwise, with the company or its subsidiary/associated companies Independent Director is not a member, director or officer of any Stock Exchange Independent Director is not a shareholder, director or officer of any member of Stock Exchange or an intermediary of the Capital Market Independent Director is not a partner or an executive or was not a partner or an executive during the preceding 3 (three) years of the concerned company s statutory audit firm Independent Director shall not be an independent director in more than 3 (three) listed Companies Independent Director has not been convicted by a court of competent jurisdiction as a defaulter in payment of any loan to a bank or a NonBank Financial Institution (NBFI) Independent Director has not been convicted for a criminal offence involving moral turpitude The independent director(s) shall be appointed by the board of directors and approved by the shareholders in Post of independent director(s) can not remain vacant for more than 90 (ninety) days The Board shall lay down a code of conduct of all Board members and annual compliance of the code to be recorded. The tenure of office of an independent director shall be for a period of 3 (three) years, which may be extended for 1 (one) term only. Annual Report

32 AnnexureA Condition Title Remarks No. put in the appropriate column) (if any) Complied Not Complied 1.3 Qualification of Independent Director (ID) 1.3 (i) Independent Director shall be a knowledgeable individual with integrity who is able to ensure compliance with financial, regulatory and corporate laws and can make meaningful contribution to business. 1.3 (ii) The person should be a Business Leader/ Corporate Leader/Bureaucrat/University Teacher with Economics or Business Studies or Law background/professionals like Chartered Accountants, Cost & Management Accountants, Chartered Secretaries. The independent director must have at least 12 (twelve) years of corporate management/ professional experiences. 1.3 (iii) In special cases the above qualifications may be N/A relaxed subject to prior approval of the Commission. 1.4 Chairman of the Board and Chief Executive Officer The positions of the Chairman of the Board and the Chief Executive Officer of the companies shall be filled by different individuals. The Chairman of the company shall be elected from among the directors of the company. The Board of Directors shall clearly define respective roles and responsibilities of the Chairman and the Chief Executive Officer. 1.5 The Directors Report to Shareholders 1.5 (i) Industry outlook and possible future developments in the industry 1.5 (ii) Segmentwise or productwise performance 1.5 (iii) Risks and concerns. 1.5 (iv) Margin and Net Profit Margin. 1.5 (v) Discussion on continuity of any ExtraOrdinary gain N/A or loss 1.5 (vi) Basis for related party transactions a statement of all related party transactions should be disclosed in the annual report 1.5 (vii) N/A issues and/or through any others instruments. 1.5 (viii) An explanation if the financial results deteriorate N/A after the company goes for Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Offer, Direct Listing, etc. 1.5 (ix) If significant variance occurs between Quarterly N/A Financial performance and Annual Financial Statements the management shall explain about the variance on their Annual Report. 1.5 (x) Remuneration to directors including independent directors. Annual Report

33 AnnexureA Condition Title Remarks No. put in the appropriate column) (if any) Complied Not Complied 1.5 (xi) The financial statements prepared by the management of the issuer company present fairly its state of affairs, the result of its operations, cash flows and changes in equity. 1.5 (xii) Proper books of account of the issuer company have been maintained. 1.5 (xiii) Appropriate accounting policies have been consistently applied in preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment. 1.5 (xiv) International Accounting Standards (IAS)/Bangladesh Accounting Standards (BAS)/International Financial Reporting Standards (IFRS)/Bangladesh Financial Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure therefrom has been adequately disclosed. 1.5 (xv) The system of internal control is sound in design and has been effectively implemented and monitored. 1.5 (xvi) There are no significant doubts upon the issuer company's ability to continue as a going concern. If the issuer company is not considered to be a going concern, the fact along with reasons thereof should be disclosed. 1.5 (xvii) Significant deviations from the last year s operating results of the issuer company shall be highlighted and the reasons thereof should be explained. 1.5 (xviii) Key operating and financial data of at least preceding 1.5 (xix) If the issuer company has not declared dividend N/A (cash or stock) for the year, the reasons thereof shall be given. 1.5 (xx) The number of Board meetings held during the year and attendance by each director shall be disclosed. 1.5 (xxi) a) The pattern of shareholding shall be reported to disclose the aggregate number of shares (along with name wise details where stated below) held by: a) Parent/Subsidiary/Associated Companies and other related parties (name wise details); 1.5 (xxi) b) Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal Audit and their spouses and minor children (name wise details); 1.5 (xxi) c) Executives; 1.5 (xxi) d) Shareholders holding ten percent (10%) or more voting interest in the company (name wise details). 1.5 (xxii) a) In case of the appointment/reappointment of a director the company shall disclose the following information to the shareholders: A brief resume of the director; Annual Report

34 Corporate Governance Condition Title No. Complied Not Complied 1.5 (xxii) b) Nature of his/her expertise in specific functional areas; 1.5 (xxii) c) Names of companies in which the person also holds the directorship and the membership of committees 2. of the board. 2.1 Appointment The company shall appoint a Chief Financial Officer (CFO), a Head of Internal Audit (Internal Control and Compliance) and a Company Secretary (CS). The Board of Directors should clearly define respective roles, responsibilities and duties of the CFO, the Head of Internal Audit and the CS. 2.2 The CFO and the Company Secretary of the companies shall attend the meetings of the Board of Directors, provided that the CFO and/or the Company Secretary shall not attend such part of a meeting of the Board of Directors which involves consideration of an agenda item relating to their personal matters (i) The company shall have an Audit Committee as a subcommittee of the Board of Directors. 3(ii) The Audit Committee shall assist the Board of Directors in ensuring that the financial statements reflect true and fair view of the state of affairs of the company and in ensuring a good monitoring system within the business. 3(iii) The Audit Committee shall be responsible to the Board of Directors. The duties of the Audit Committee shall be clearly set forth in writing (i) The Audit Committee shall be composed of at least 3 (three) members. 3.1(ii) The Board of Directors shall appoint members of the Audit Committee who shall be directors of the company and shall include at least 1 (one) independent director. 3.1(iii) All members of the audit committee should be financially literate and at least 1 (one) member shall have accounting or related financial management experience. 3.1(iv) When the term of service of the Committee members expires or there is any circumstance causing any Committee member to be unable to hold office until expiration of the term of service, thus making the number of the Committee members to be lower than the prescribed number of 3 (three) persons, the Board of Directors shall appoint the new Committee member(s) to fill up the vacancy(ies) immediately or not later than 1 (one) month from the date of vacancy(ies) in the Committee to ensure continuity of the performance of work of the Audit Committee. N/A Annual Report

35 Corporate Governance Condition Title No. Complied Not Complied 3.1(v) The company secretary shall act as the secretary of the Committee. 3.1(vi) The quorum of the Audit Committee meeting shall not constitute without at least 1 (one) independent director (i) The Board of Directors shall select 1 (one) member of the Audit Committee to be Chairman of the Audit Committee, who shall be an independent director. 3.2 (ii) Chairman of the audit committee shall remain present in the Annual General Meeting (AGM). 3.3 Role of Audit Committee 3.3 (i) Oversee the financial reporting process 3.3 (ii) Monitor choice of accounting policies and principles. 3.3 (iii) Monitor Internal Control Risk management process. 3.3 (iv) Oversee hiring and performance of external auditors. 3.3 (v) Review along with the management, the annual financial statements before submission to the board for approval. 3.3 (vi) Review along with the management, the quarterly and half yearly financial statements before submission to the board for approval. 3.3 (vii) Review the adequacy of internal audit function. 3.3 (viii) Review statement of significant related party transactions submitted by the management 3.3 (ix) Review Management Letters/ Letter of Internal Control weakness issued by statutory auditors. 3.3 (x) When money is raised through Initial Public Offering N/A (IPO)/Repeat Public Offering (RPO)/Rights Issue the company shall disclose to the Audit Committee about the uses/applications of funds by major category (capital expenditure, sales and marketing expenses, working capital, etc), on a quarterly basis, as a part of their quarterly declaration of financial results. Further, on an annual basis, the company shall prepare a statement of funds utilized for the purposes other than those stated in the offer document/prospectus (i) The Audit Committee shall report on its activities to the Board of Directors (ii) a) The Audit Committee shall immediately report to the Board of Directors on the following findings, if any: a) report on conflicts of interests (ii) b) suspected or presumed fraud or irregularity or material defect in the internal control system (ii) c) suspected infringement of laws, including securities related laws, rules and regulations (ii) d) any other matter which shall be disclosed to the Board of Directors immediately Annual Report

36 Corporate Governance Condition Title No. Complied Not Complied (i) 4 (ii) 4 (iii) 4 (iv) 4 (v) 4 (vi) 4 (vii) 4 (viii) 4(ix) 5. 5 (i) Reporting to the Authorities If the Audit Committee has reported to the Board of Directors about anything which has material impact on the financial condition and results of operation and has discussed with the Board of Directors and the management that any rectification is necessary and if the Audit Committee finds that such rectification has been unreasonably ignored, the Audit Committee shall report such finding to the Commission, upon reporting of such matters to the Board of Directors for three times or completion of aperiod of 6 (six) months from the date of first reporting to the Board of Directors, whichever is earlier. Report on activities carried out by the Audit Committee, including any report made to the Board of Directors under condition (ii) above during the year, shall be signed by the Chairman of the Audit Committee and disclosed in the annual report of the issuer company. The issuer company should not engage its external/statutory auditors to perform the following services of the company; namely: (i) Appraisal or valuation services or fairness opinions. Financial information systems design and implementation. Bookkeeping or other services related to the accounting records or financial statements. Brokerdealer services. Actuarial services. Internal audit services. Any other service that the Audit Committee determines. No partner or employees of the external audit firms shall possess any share of the company they audit at least during the tenure of their audit assignment of that company. Audit/certification services on compliance of corporate governance as Required under clause (i) of condition no. 7. Provisions relating to the composition of the Board of Directors of the holding company shall be made applicable to the composition of the Board of Directors of the subsidiary company. Annual Report

37 Corporate Governance Condition Title No. Complied Not Complied 5 (ii) 5 (iii) 5 (iv) 5 (v) 6. 6 (i) a) 6 (i) b) 6 (ii) 7. 7 (i) 7 (ii) At least 1 (one) independent director on the Board of Directors of the holding company shall be a director on the Board of Directors of the subsidiary company. The minutes of the Board meeting of the subsidiary company shall be placed for review at the following Board meeting of the holding company. The minutes of the respective Board meeting of the holding company shall state that they have reviewed the affairs of the subsidiary company also. The Audit Committee of the holding company shall also review the financial statements, in particular the investments made by the subsidiary company. The CEO and CFO shall certify to the Board that: (i) They have reviewed financial statements for the year and that to the best of their knowledge and belief: a) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading these statements together present a true and fair view of the company s affairs and are in compliance with existing accounting standards and applicable laws. There are, to the best of knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or violation of the company s code of conduct The company shall obtain a certificate from a practicing Professional Accountant/Secretary (Chartered Accountant/Cost and Management Accountant/Chartered Secretary) regarding compliance of conditions of Corporate Governance Guidelines of the Commission and shall send the same to the shareholders along with the Annual Report on a yearly basis. The directors of the company shall state, in accordance with the Annexure attached, in the directors' report whether the company has complied with these conditions. Annual Report

38 Directors Statement of Responsibilities Bismillahir Rahmanir Rahim Dear Fellow Shareholders The Directors are required to present the Directors Report together with the Financial Statements in the Annual Report in accordance with the Companies Act, 1994, Rules and Regulations of Institute of Chartered Accountants of Bangladesh (ICAB), Rules and Regulations of Bangladesh Bank (BB), Bangladesh Securities and Exchange Commission (BSEC) Rules, 1987 and the Listing Rules of the Dhaka Stock Exchange Ltd (DSE) and Chittagong Stock Exchange Ltd (CSE) respectively. The financial statements are required by Law and International Accounting Standards and International Financial Reporting Standards (IFRS) as adopted by ICAB to present fairly the financial position of the Company and the performance for the period. Proper accounting records should be kept which disclose with reasonable accuracy of the financial position of the Company and enable them to ensure that its financial statements comply with Companies Act, 1994 and the Bank Company (Amendment) Act, 2013 including the above mentioned regulations. The Directors of, further confirm that the Directors Report together with the Financial Statements in the Annual Report for the year 2013 have been prepared in compliance with law, rules and regulatory guidelines as per the Companies Act, 1994, the Bank Company (Amendment) Act, 2013, guidelines issued by Bangladesh Bank and also in compliance of SEC Notification No. SEC/CMRRCD/ /Admin/44 dated 07 August Board of Directors of AB meet regularly to consider Bank s Policies, Procedures, Risk Management and Business Plan among others. During the year 2013, 30 (thirty) Meetings of the Board of Directors took place. This report should be read in conjunction with the Auditors Report to the Shareholders of. Other compliance as per BSEC Notification No. SEC/CMRRCD/ /Admin/44 dated 7 August 2012 is given separately. Some of the information in this Annual Report may contain projections or other forwardlooking statements regarding the Bank. These statements are based on our expectations and assumptions. Statements of such nature are not be construed as guarantees of future performance. Therefore, actual future results and trends may differ materially from what is in our forwardlooking statements. On behalf of the Board. M. Wahidul Haque Chairman Annual Report

39 Report of the Audit Committee The Audit Committee of operates within the guidelines of Bangladesh Bank and also carries oversight responsibilities. The Board of Directors set out the overall Business Plan & formulates policies that the Management is responsible for implementation. The Audit Committee, on behalf of the Board, strives to ensure effective implementation of the processes and procedures set out in the Business Plans and Policies. Audit Committee also reviews the internal control regime and compliance status of the Bank as a whole. Functions of The Audit Committee Main function of the Audit Committee is to facilitate the Board in its oversight responsibilities. In order to fulfill the responsibilities, among others, main responsibilities of the Audit Committee are as follows: Review Internal Control Review Financial Statements Review Internal Audit Review the findings of External Audit Compliance of rules and regulations Others Composition of the Audit Committee Current Audit Committee is comprised of 1. Mr. Shishir Ranjan Bose, FCA, Ind. Director, ABBL Chairman 2. Mr. M. Wahidul Haque, Chairman, ABBL Member 3. Mr. M.A. Awal, Director, ABBL Member 4. Mr. Syed Afzal Hasan Uddin, Director, ABBL Member 5. Ms. Runa Zakia Shahrood Khan, Ind. Director, ABBL Member As per SEC Notification No. SEC/CMRRCD/ /Admin/44 dated 07 August 2012, an independent Director of the Board is the Chairman of the Audit Committee. As per regulatory guidelines, the Company Secretary of the Bank acts as the Secretary to the Audit Committee. Senior officials of the Bank attend the Meetings on invitation. Meetings of The Audit Committee recommended its submission to the shareholders as a statutory requirement corrective actions Bank including status of compliance thereof functions conducted by the Internal Control & Compliance Division (ICCD) Approval of Financial Statements The Audit Committee reviewed and examined the Annual Financial Statements, for the year 2013 prepared by the Management and audited by the External Auditors ACNABIN Chartered Accountants and recommended these to the Board for consideration. Acknowledgement The Audit Committee expresses its sincere thanks to the Members of the Board and the Management of AB for their excellent support in carrying out the duties and responsibilities of the committee during the period under review. The Audit Committee had held 16 (sixteen) Meetings during the year During the year under review the Committee, inter alia, focused on following activities (not an exhaustive test) with the External Auditors recommended it to the Board for their considerations Auditors, Management responses thereto and corrective measures taken by the Bank to avoid recurrence of the lapses mentioned therein Shishir Ranjan Bose, FCA Chairman, Audit Committee Annual Report

40 Report of the Executive committee Executive Committee of the Board has been formed following the guidelines of Bangladesh Bank and comprises of 7 (seven) Members nominated by the Board. ViceChairman of the Board is the Chairman of the Executive Committee. Bank s Executive Committee is assigned with responsibilities of reviewing specific areas of business which includes inter alia review of delinquent asset management, legal cases, functional performance review, new Branch performance review. Executive Committee also ensures proper and timely implementation of Policies and guidelines issued by the Board through Management. Executive Committee comprises of the following: Mr. Salim Ahmed, Vice Chairman, ABBL Mr. Md. Mesbahul Hoque, Director, ABBL Mr. Feroz Ahmed, Director, ABBL Mr. B.B. Saha Roy, Director, ABBL Mr. Faheemul Huq, Director, ABBL Mr. Md. Anwar Jamil Siddiqui, Director, ABBL Mr. Prof. Dr. M. Imtiaz Hossain, Director, ABBL Chairman Member Member Member Member Member Member Executive Committee expresses its sincere thanks to the Members of the Board and the Management of AB for their excellent support while carrying out the duties and responsibilities of the Committee. Salim Ahmed Chairman, Executive Committee Annual Report

41 Report of the Risk Management Committee The Risk Management Committee of is formed as per requirement of section 15 Kha (3) of the Banking Company (Amendment) Act 2013 and as per BRPD circular no. 11 dated 27 October 2013 with a view to execute risk related responsibilities of the BOD with due care and competency. This committee take necessary initiatives to minimizes probable risk arises from the overall business plan set out and policies formulated by the BOD of the Bank. Functions of the Risk Management Committee Main function of the Risk Management Committee as a integral part of the Board is to identify and measure the undermentioned risks and to oversee whether the management of the bank properly implement those risk minimizing ways and methods. Those risks are: Members of the Risk Management Committee Current Risk Management Committee is comprised of 1. Mr. M. Wahidul Haque, Chairman AB Bank Chairman 2. Mr. Shishir Ranjan Bose, FCA, Director AB Bank Member 3. Mr. B.B. Saha Roy, Director AB Bank Member 4. Mr. Syed Afzal Hassan Uddin, Director AB Bank Member 5. Mr. Md. Anwar Zamil Siddiqui, Director AB Bank Member Meeting of the Risk Management Committee 541st Board Meeting of the Bank on 26 December The first meeting was held as on 4th February The meeting resolves to review: procedure for ensuring effective control system (in a shortcut form) summarized form limit Acknowledgement The Risk Management Committee expresses its gratitude to the Member of the Board for forming the Risk Management Committee and assigning its duties and responsibilities. M. Wahidul Haque Chairman, Risk Management Committee To comply with the clauses of BRPD Circular No.11 dated 27 October 2013 the Risk Management Committee was formed in the Annual Report

42 Annual Report

43 INVESTOR RELATIONS

44 Forward Looking Statements Annual Report for the year 2013 contains statements which are based on assumptions, estimates, believes and future expectations. Such forward looking statements may include but not limited to future plan, performance, growth of business, profitability and cash flow of the Bank which are subject to known and unknown risks. Actual performance or results may materially differ from original plan, assumptions, estimates or expectations expressed or implied in forward looking statements. Therefore, undue reliance should not be placed on such statements for making any decisions, transactions or investments with the Bank. Bank does not guarantee in any way that the expressions made or implied in forward looking statements would be materialized. Bank does not also take any responsibility to update, modify or revise any forward looking statements contained in this Annual Report irrespective of whether those are changed by any new events, information or future development or by any other factors. Annual Report

45 Shareholders Information Financial Highlights AB Bank & Consolidated Equity Total Deposits Loans & advances Investments Fixed assets Total assets Interest Income Operating Profit Provision for loans and others Profit before tax Provision for tax Profit after tax Liquid Assets Capital adequacy ratio Earnings per share () Dividend % Net Asset Value per share () Ratios Classified Loan Return on Assets (ROA) Return on Equity (ROE) , , ,121 28,676 4, ,006 17,953 5,290 2,305 2,985 1,974 1, % 10.80% 2.03 * % 0.53% 6.13% , , ,066 26,115 4, ,842 15,714 4,363 1,173 3,190 1,752 1, % 11.73% % 0.88% 9.31% 6% 16% 32% 10% 1% 20% 14% 21% 97% 6% 13% 30% 30% 6% Consolidated Million BDT , , ,129 29,617 4, ,749 18,365 5,545 2,372 3,173 2,075 1, % 10.85% 2.20 * % 0.57% 6.55% 16, , ,663 26,950 4, ,517 16,498 4,719 1,223 3,496 2,034 1, % 11.63% % 0.89% 9.36% 7% 16% 29% 10% 3% 20% 11% 17% 94% 9% 2% 25% 25% 5% *Proposed 9.25% 2.39% 5.75% 4.80% 77.81% Paid up Deposit Borrowings Reserve & surplus Other Liabilities 2.01% 7.43% Loans & Advances 9.42% Investments Liquid Assets Fixed Assets Other Assets 67.36% 13.79% Consolidated % 2.37% 5.87% 4.95% 77.05% Paid up Deposit Borrowings Reserve & surplus Other Liabilities 2.26% 4.73% 8.74% 70.15% 14.12% Loans & Advances Investments Liquid Assets Fixed Assets Other Assets Annual Report

46 OUR PERFORMANCE Financial position Cash & bank balances Investments Money at call and short notice Loans & advances Fixed assets Other assets Total assets Borrowings Total deposits Other liabilities Equity Total liability & SH's equity Total contingent liabilities & commitments Loan Deposit Ratio Interest earning assets NonInterest earning assets Net interest margin Operating income Operating expenses Operating profit Provision for loans and others Profit before tax Provision for tax Profit after tax Cost income ratio Return on investment (ROI) Return on assets (ROA) Return on equity (ROE) Cost of fund Earning Per Share Net income per share Import Export Remittance (Million USD) Authorized capital Paidup capital Capital Core (Tier I) Capital Supplementary (Tier II) Total capital Capital surplus/ (deficit) Statutory reserve Retained earnings Capital adequacy ratio Asset quality Total loans & advances Classified loans (CL) % CL to total loans & advances Provision for unclassified loan Provision for classified loan Market Price per share (DSE) Dividend % Bonus % Cash % Price earning ratio (times) Net Asset Value per share () Number of branches Number of SME service center Employee number ,599 28, ,121 4,173 15, ,006 9, ,846 19,232 16, ,006 83, % 175,978 32,028 3,780 9,755 4,465 5,290 2,305 2,985 1,974 1, % 10.37% 0.53% 6.13% 11.82% ,383 72, ,000 4,976 15,570 3,203 18,772 1,385 5,565 4, % 140,121 4, % 1,707 2, * , ,499 26,115 3, ,066 4,230 15, ,842 3, ,026 14,133 16, ,842 59, % 144,167 29,676 3,123 8,435 4,072 4,363 1,173 3,190 1,752 1, % 11.39% 0.88% 9.31% 12.07% ,373 65, ,000 4,423 14,630 2,552 17,181 2,532 5,005 5, % 106,066 3, % 1,270 1, , ,524 21, ,638 3,854 14, ,963 10, ,152 11,710 14, ,963 52, % 125,049 27,914 2,394 7,743 3,431 4,312 1,355 2,957 1,629 1, % 14.62% 0.93% 9.25% 11.19% ,463 57, ,000 3,686 13,410 2,534 15,943 1,920 4,390 5, % 94,638 2, % 1,317 1, , ,914 14, ,002 3,926 12, ,691 14,200 95,702 8,922 13, ,691 44, % 110,453 22,535 3,481 10,898 3,489 7,409 1,052 6,357 2,661 3, % 32.72% 3.08% 30.77% 9.89% ,751 41, ,000 3,205 12,411 2,249 14,660 1,345 4,396 4, % 88,002 1, % 1, ,008 Million BDT ,849 16, ,880 2,441 7, ,912 6,125 83,087 7,542 10, ,912 28, % 86,768 20,144 2,908 8,269 2,466 5, ,205 1,842 3, % 21.06% 3.52% 39.84% 10.31% ,956 30, ,000 2,564 9,250 1,668 10,918 1,072 3,101 3, % 70,880 1, % ,952 *Proposed Annual Report

47 OUR PERFORMANCE Financial position Cash & bank balances Investments Money at call and short notice Loans & advances Fixed assets Other assets Total assets Borrowings Total deposits Other liabilities Equity Total liability & SH's equity Total contingent liabilities & commitments Loan Deposit Ratio Interest earning assets NonInterest earning assets Net interest margin Operating income Operating expenses Operating profit Provision for loans and others Profit before tax Provision for tax Profit after tax Cost income ratio Return on investment (ROI) Return on assets (ROA) Return on equity (ROE) Cost of fund Earning Per Share Net income per share Import Export Remittance (Million USD) Authorized capital Paidup capital Capital Core (Tier I) Capital Supplementary (Tier II) Total capital Capital surplus/ (deficit) Statutory reserve Retained earnings Capital adequacy ratio Asset quality Total loans & advances Classified loans (CL) % CL to total loans & advances Provision for unclassified loan Provision for classified loan Market Price per share (DSE) Dividend % Bonus % Cash % Price earning ratio (times) Net Asset Value per share () Number of branches Number of SME service center Employee number ,396 11,396 1,191 56,709 2,445 5,918 84,054 3,193 68,560 5,577 6,723 84,054 26, % 68,580 15,473 2,034 6,153 1,854 4, ,601 1,300 2, % 23.89% 3.12% 40.96% 11.09% ,041 28, ,000 2,230 6,128 1,312 7,440 1,644 2,066 1, % 56,709 1, % , ,160 8, ,915 2,381 4,635 63,550 1,872 53,375 3,791 4,512 63,550 27, % 49,208 14,342 1,439 4,657 1,331 3, , , % 22.87% 3.41% 42.19% 10.54% ,441 20, , , , ,357 1, % 40,915 1, % , ,520 6, ,289 1,148 4,233 47,990 1,297 42,080 2,032 2,580 47,990 21, % 37,570 10, ,650 1, % 18.81% 1.11% 20.61% 10.04% ,860 17, , , , % 31, % , ,476 4, , ,384 33,065 1,911 27,361 2,267 1,527 33,065 14, % 24,007 9, , % 5.88% 0.50% 11.73% 8.60% ,151 12, , , % 21,385 1, % ,525 Million BDT ,891 6, , ,148 32, ,299 2,209 1,244 32,510 13, % 23,750 8, ,460 1, % 6.66% 0.39% 7.24% 8.53% ,266 10, , , % 17,010 2, % ,726 Annual Report

48 Graphical Presentation 3,363 3,696 1,328 1,439 1,011 83,087 95, , , ,846 2,441 3,926 3,854 4,230 4, Million BDT eposits Million BDT Fied Assets Million BDT 5,802 7,409 4,312 4,363 5,290 10,158 13,867 14,853 16,034 16, , , , , , Opeatin ofit Million BDT Saeoldes' Equity Million BDT Total Assets Million BDT ,880 88,002 94, , ,121 1,949 1,852 2,672 3,522 4, Eanins e Sae BDT Annual Report Loans Million BDT Classified Loans Million BDT

49 Graphical Presentation 39.84% 30.77% 9.25% 9.31% 6.13% 5,361 7,416 5,349 5,312 5,976 2,437 2,357 2,708 2,598 3, Retun on Equity (% Non Inteest Income Million BDT Fee ased Income Million BDT 3.52% 3.08% 0.93% 0.88% 0.53% Assets Employed Retun on Asset (% Net Asset alue e Sae BDT Conventional Banking: 92% Islamic Banking: 5% Investment Banking: 3% 30% 32% 44% 48% 46% Cost Income Ratio (% aet ice e Sae (SE BDT Annual Report

50 Shareholders Pattern Sponsors & Directors 69,196,634 61,508, % 13.91% Local Institutions 273,001, ,483, % 56.18% Govt. of Bangladesh 2,852,441 2,535, % 0.57% Foreign Institutions 3,227,029 2,450, % 0.55% Nonresident Bangladeshi 1,746,331 1,437, % 0.33% General Public 147,601, ,918, % 28.47% % % General Public 29.66% Sponsors & Directors 13.91% General Public 28.47% Sponsors & Directors 13.91% Nonresidential Bangladeshi 0.35% Nonresidential Bangladeshi 0.33% Foreign Institutions 0.65% Govt of Bangladesh 0.57% Local Institutions 54.86% Foreign Institutions 0.55% Govt of Bangladesh 0.57% Local Institutions 56.18% Mr. M. Wahidul Haque Mr. Salim Ahmed Mr. Feroz Ahmed Mr. M. A. Awal Mr. Shishir Ranjan Bose,FCA Mr. Faheemul Huq, BarristeratLaw Mr.Syed Afzal Hasan Uddin, Barristeratlaw Mr. Gholam Sarwar Mr. Md. Mesbahul Hoque Mr. Md. Anwar Jamil Siddiqui Mr. B.B. Saha Roy Dr. M. Imtiaz Hossain Mrs. Runa Zakia Shahrood Khan Mr. M. Fazlur Rahman Status Chairman ViceChairman Director Director Independent Director Director Director Director Director Director Director Depositor/Independent Director Depositor/Independent Director President & MDExofficio Director ,662 95,700 11,754,084 10,448,076 10,325,069 9,177,840 3,118 2,772 2,214 1, , ,524 2,214 1,968 11, ,214 1,968 2,214 1,968 1,930 1,716 Annual Report

51 Financial Calendar Unaudited results for the 1st Quarter ended 31st March 2013 Unaudited result for the 2nd quarter and halfyear ended 30th June 2013 Unaudited results for the 3rd Quarter ended 30th September 2013 Audited consolidated results for the year ended 31 st December 2013 Announced on Announced on Announced on Announced on April 30, 2013 July 28, 2013 October 29, 2013 March 12, st 31st AGM Notice Annual Report2012 Distribution Stock Dividend Credited Cash Dividend Distribution Fraction Distribution Price Sensitive Information Record Date AGM Published Date Respective BO Account N/A BEFTN March 31, 2013 April 30, 2013 July 07, 2013 June 13, 2013 June 20, 2013 July 14, 2013 N/A August 27, nd Price Sensitive Information Record Date Notice of the 32nd AGM Date of 32nd AGM March 13, 2014 March 25, 2014 March 14, 2014 April 21, 2014 Stock symbol Listing Year Market category Electronic share Face Value () Market lot Total number of securities ABBANK December, 1983 A YES CSE ABBNK January, 1996 A YES Annual Report 2013 and other information about ABBL may be viewed on ABBL website Annual Report

52 Price Trend of AB Bank Share Year End closing Year High Year Low Average Trade Volume (Per Day) Total Trade Volume BDT BDT BDT ,467 shares per day 79,841,250 shares Price/share in BDT Jan Jan Jan Feb Feb Mar Mar2013 9Apr Apr2013 7May May2013 4Jun Jun2013 2Jul Jul Jul Aug Aug Sep Sep2013 8Oct Oct2013 5Nov Nov2013 3Dec Dec2013 1,600,000 1,400,000 1,200,000 1,000,000 Share Volume 800, , , , Milions Jan13 08Jan13 15Jan13 22Jan13 29Jan13 05Feb13 12Feb13 19Feb13 26Feb13 05Mar13 12Mar13 19Mar13 26Mar13 02Apr13 09Apr13 16Apr13 23Apr13 30Apr13 07May13 14May13 21May13 28May13 04Jun13 11Jun13 18Jun13 25Jun13 02Jul13 09Jul13 16Jul13 23Jul13 30Jul13 06Aug13 13Aug13 20Aug13 27Aug13 03Sep13 10Sep13 17Sep13 24Sep13 01Oct13 08Oct13 15Oct13 22Oct13 29Oct13 05Nov13 12Nov13 19Nov13 26Nov13 03Dec13 10Dec13 17Dec13 24Dec13 Annual Report

53 BCIC Bhaban, 3031 Dilkusha C/A, Dhaka NOTICE OF THE 32ND (THIRTY SECOND) ANNUAL GENERAL MEETING Notice is hereby given that the 32nd (thirtysecond) Annual General Meeting (AGM) of AB Bank Limited will be held on April 21, 2014 (Monday) at 9:15 am at Bashundhara Convention Centre2, BlockC, Umme Kulsum Road, Bashundhara R/A, Baridhara, Dhaka, to transact the following business: Agenda 1. To receive and adopt the Directors Report, the Audited Financial Statements for the year ended 31st December, 2013 and the Auditors Report thereon. 2. To declare the Dividend for the year ended 31st December, 2013 as recommended by the Board of Directors. 3. To elect/reelect Directors. 4. To appoint/reappoint Auditors for the year 2014 and fix their remunerations. Dated: March 14, 2014 By order of the Board Sd/ NOTES: 1. Record date is 25th March, 2014 (Tuesday). The Shareholders whose names appeared in the Register of Members of the Company or in the Depository Register on the Record Date will be eligible to attend the AGM and will qualify for the Dividend. 2. A Member entitled to attend and vote at the Annual General Meeting can appoint a proxy to attend and on a poll to vote on his/her behalf. Form of Proxy duly stamped must be deposited at the Company s Registered Office not later than forty eight hours before the time fixed for the meeting and in default, Form of Proxy will not be treated as valid. 3. Members are requested to notify change of address, if any, well ahead. For BO Account holders, the same to be rectified through their respective Depository Participants. 4. Admission into the Venue of the AGM will be allowed on production of the Attendance Slip sent with the Annual Report. 5. Shareholders are requested to register their names in the counter at the AGM Venue from 7:00 am to 9:30 am. N.B. As per BSEC Directive No. SEC/CMRRCD/ /154 dated , No benefit in cash or kind, other than in the form of cash dividend or stock dividend, shall be paid to the holders of equity securities, in the ensuing 32nd AGM of the Bank. Annual Report

54 Glimpses of 31st AGM The Board of Directors conducting 31st AGM 2. The Chairman, along with the Vice Chairman and Managing Director, answering shareholders Annual Report

55 Glimpses of 31st AGM First Sponsor Chairman expressing his views 4. Honorable Chairman extending a warm welcome to the shareholders 5. Shareholders registering for AGM 6. & 7. Partial view of shareholders Annual Report

56 Glimpses of 31st AGM First Sponsor Chairman amongst the attendees 9. Podium support members 10. Shareholders registering for AGM 11. Registration booths at the AGM Centre Annual Report

57 ECONOMIC IMPACT REPORT

58 Economic Impact Report AB being a responsible corporate citizen and a dynamic financial institution has created value in line with its mission To be the best performing bank in the country. Toward this value creation AB has put in place an organizational and operational framework which is based on transparent and ethical conduct of business. Bank has systems, processes, and procedures to create value with appropriate risk management (validation) system in order to ensure sustainable value addition to stakeholders. It has not been a case of bottom line enhancement alone but creation of value conducive to socio economic development. Savings, Investment, Production, Distribution, Consumption of goods and service, and Employment Generation are essential parts of an Economic System. As a financial intermediary Bank plays an important catalytical role in the mobilization of resources like saving and allocation thereof in productive investments, consumptions and development of trading activities locally and internationally. Economic impact related to a bank as an institution and ordained activities of a bank extends beyond the boundaries of any single organization and is linked to both environmental and social development. By analyzing economic impact we seek to understand how a company adds value to society. Bank s direct contributions to the economy would comprise of creation of employment opportunities, collection of taxes on behalf of the government etc. including harnessing the savings habits among the members of the community and improvement of socioeconomic and environmental performance in client organizations through banking services could be considered as indirect contributions. Bank as an institution is woven in to the socioeconomic fabric involving numerous sector of the society which together are identified as stakeholders of a bank. Shareholders provide much needed capital depositors and investors invest money, borrowers obtain credit facility, employees put their effort for the bank to serve customers and government provides financial infrastructure by way of regulatory, systems, supervisions etc. Financial services thus provided lead to creation of wealth which is bound to be distributed among stakeholders in different forms of distribution like Dividend, Interest, Tax, Salaries etc. Sources & Distribution of Income for the year ended December 31, 2013 BDT in Crore 2013 % of Total 2012 % of Total Source of Income Interest income Investment income Commission, exchange and brokerage Other operating income Distribution of Income Interest paid on deposits and borrowing etc. Salaries and allowances To Suppliers for providing goods and services Depreciation set aside Provision for Loan & Advances, and Others To Government as Income Tax To Statutory Reserve To Retain Earnings 2,393 1, ,393 1, % 75% 12% 13% 0.5% 100% 59% 9% 9% 1% 10% 8% 2% 2% 2,103 1, ,103 1, % 75% 13% 12% 1% 100% 60% 9% 9% 2% 6% 8% 3% 4% Distribution of Income 2013 Sources of Income 2013 Interest income: 75% Investment income: 12% Commission, exchange and brokerage: 13% Other operating income: 0.5% Interest paid on deposits and borrowing etc.:59% Salaries and allowances: 9% To Suppliers for providing goods and services: 9% Depreciation set aside: 1% Provision for Loan & Advances, and Others: 10% To Government as Income Tax: 8% To Statutory Reserve: 2% To Retained Earnings: 2% Annual Report

59 Economic Impact Report AB has taken following measures to create, sustain and deliver value which are as follows: Capital adequacy is the measure of the financial strength and sustainability of a bank. Capital Adequacy Ratio (CAR) determines the capacity of the Bank in terms of meeting the time liabilities and other risks such as credit risks, market risks, operational risks, etc. It is the policy of AB to maintain adequate capital as a cushion for potential losses to absorb unforeseen eventualities/shocks, to ensure long term sustainability and growth of the Bank to endure and enhance shareholders value. At the end of 2013, Bank s total capital reached at BDT 1, Crore as against BDT 1, Crore on 31 December Risk management covering credit risks, market risks and operational risks is at the heart of all business operations and transactions of AB. Risk management system has been designed and implemented to ensure quality and value of assets and smooth banking operations and services in a sustainable way to protect interest of shareholders, depositors and all the stakeholders. Risk management systems also comply with Bangladesh Bank s core risk management guidelines. AB s dividend policy aims at ensuring long term sustainable growth maintaining capital adequacy requirements which ultimately leads to shareholders value creation. Summary of total capital and capital adequacy ratio of the Bank under Basel II is as follows: BDT in Crore Core Capital Tier I 1, , Supplementary Capital Tier II Total Capital 1, , Risk weighted assets 17, , CAR against Core Capital 8.95% 9.99% Supplementary Capital 1.84% 1.74% Total Capital 10.80% 11.73% AB Bank paid 12.5 percent Stock Dividend in 2012 while for 2013 the proposition is 7 percent Stock Dividend and 5 percent Cash Dividend respectively. Bank maintains liquid assets to carry out the daytoday operations and fulfill the statutory requirements in relation to business as imposed by the regulator from time to time. Asset & Liabilities Committee (ALCO) of the Bank monitors the evolving business situation and provides direction to maintain an optimum tradeoff between liquidity and profitability. Total Capital In Crore BDT Capital Adequacy Dividend *Proposed 12.5% 12% 1,092 1,466 1,594 1,718 1, % 9.91% 11.37% 11.73% 10.80% % of Dividend 45% 25% 25% * Annual Report

60 Economic Impact Report AB maintains positive mismatch in interest earning assets and interest bearing liabilities. Bank has detailed laid down plan for business inflowoutflow to manage liquidity profile and also ensure generation of profitability. Bank follows a well defined strategy and plan to mobilize resources such as deposits and borrowings besides the capital, cost effective market responsive measures of fund mobilization are adopted for the purpose with due consideration for of profitable investments for bottom line growth. Resource allocation at competitive rate follows the productive sectors including export oriented sectors shipbreaking etc. Sectors like SME, Women Entrepreneur and Agriculture are also in the resource mobilization scheme. Bank maintained CreditDeposit ratio to ensure resource utilization in proper. This has contributed towards improvement of assets quality and generation of income in the overall. Further, the costincome ratio of the Bank signifies the optimum utilization of resources. Shareholders equity of the Bank stood of 1,694 crore on 31 December 2013 being resultant cumulative of prudent dividend, tax and capital expenditure planning. F. Contribution to the National Exchequer AB Bank contributed BDT 427 crore into the national exchequer in the form of VAT, Income Tax and Excise Duty. Retained earnings Other reserve Statutory reserve Paidup capital Loan Deposit Ratio (%) Contribution to the National Exchequer In Crore BDT Total Equity In Crore BDT Annual Report

61 Economic Impact Report Value Added Statement (VAS) for the year ended 31 December 2013 The Value Added Statement for the Bank shows how the value is created and distributed among different stakeholders of the Bank Income from Banking Services/Total Income Interest paid on deposits and borrowings, etc Total operating expenses excluding salary and allowances and depreciation & amortization Less: Loan loss provision and other provisions Total value added 2, , , , , , To Government To employees To statutory reserve To expansion and Growth Retained earning Depreciation & amortization % 39% 11% 14% % 35% 12% 21% To Government: 37% To employees: 39% To statutory reserve: 11% To expansion and Growth: 14% To Government: 33% To employees: 35% To statutory reserve: 12% To expansion and Growth: 21% Annual Report

62 Economic Impact Report EVA Statement for the year ended 31 December 2013 Economic Value Added (EVA) is a key performance indicator to measure profitability of a Bank as compared to cost of equity capital. It indicates how much additional value has been created by the Bank for its shareholders after deducting the minimum rate of return required by the shareholders i.e. cost of equity. In Crore BDT Shareholder's equity Add: Cumulative provisions 1, , , Profit after taxation Add: Total provisions excluding taxation Average Cost of Equity (based on highest rate of Shanchay Patra issued by the Government of Bangladesh) plus 2% risk premium [C] 15.19% 15.19% 14.07% Cost of average equity [D=A X C] % In Crore BDT 14 (43) (9) Annual Report

63 Economic Impact Report Market Value Added (MVA) Statement for the year ended 31 December 2013 Market Value Added (MVA) is the difference between the current market value (based on the quoted price in the main bourse) of a company and the capital contributed by investors. A high MVA indicates the company has created substantial wealth for the shareholders. The share market value of AB stood at BDT 1,304 crore whereas the book value of the Shareholder's Equity stood at BDT 1,694 crore, resulting in a negative Market Value of BDT 390 crore as on 31 December The calculation of Market Value is given below: In Crore BDT Total market value of the equity Less: Total book value of the equity 1,304 1,694 1,491 1, % 160% 150% 100% 50% 0% Book Value 130% Market Value Added 30% 120% 80% 40% 0% Book Value 108% Market Value Added 8% 50% 40% 100% Annual Report

64 RISK MANAGEMENT REPORT

65 Risk Management Report 1. Overview No business can be successful without taking certain risks. The banking sector in Bangladesh is no exception. While calculated and well informed, risk taking can produce the desired results; over ambitious and reckless risk appetite can culminate in disaster for any business. The art is to know the risks associated with the business and to keep these risks at a manageable level. Therefore, the term Risk Management. The role and importance of Risk Management department in the banking sector is ever increasing, specially in light of the recession being experienced worldwide. Risk Management is a discipline at the core of every financial institution and encompasses all activities that affect its risk profile. It involves identification, measurement, monitoring and controlling risks associated with the institution s business. It helps the management and the Board of Directors of a bank to make calculated decisions and pragmatic planning for the future. AB Bank has always taken cognizance of the risks associated to conducting a banking business. Accordingly a wellorganized risk management team has been set up in line with guidelines provided by Bangladesh bank and incorporating best practices in the industry. 2. Risks in Banking Sector Sl no Risks in Banking Sector Major Risk Sl no. Credit risk 1. Market risk 2. Operational risk 3. Liquidity risk 4. Money laundering Risk AB s Risk Management Strategy Objective Other material risk Business risk Technological risk Reputational risk Residual risk Evaluation of core risk management Credit concentration risk Interest rate risk in the Banking Book Settlement risk Reputational risk Strategic risk Environmental risk At a strategic level, Bank's risk management objectives are: To identify the Bank's material risks To formulate the Bank's Risk Appetite and ensure that business profile and plans are consistent with it To optimize risk/return decisions by taking them as closely as possible to the business, while establishing strong and independent review and challenge structures To ensure that business growth plans are properly supported by effective risk infrastructure To manage risk profile to ensure that specific financial deliverables remain possible under a range of adverse business conditions To help executives improve the control and coordination of risk taking across the business Policies & Guidelines To ensure that risks are properly addressed and protected for sustainable development of the Bank, there are approved policies and procedures covering all risk areas. These are formulated taking into account Bangladesh Bank's Guideline on managing Core Risks on Credit Risk Management, Internal Control & Compliance, Asset and Liability Management, Foreign Exchange Risk Management, Information Technology Risk Management and Money Laundering Risk Management. These policies are regularly reviewed and updated to keep pace with the changing operating environment, technology and regulatory requirements. Assigning responsibilities Responsibility for risk management resides at all levels within the Bank, from the Board, Risk Management Committee (RMC) and the Executive Committee down through the organization to each business manager and risk specialist. Bank distributes these responsibilities so that risk/return decisions are taken at the most appropriate level; as close as possible to the business, and subject to robust and effective review and challenge. The risk management procedures are approved, monitored and mitigated at various stages of the Bank with a combination of Board, its CommitteesExecutive Committee, Audit Committee and Risk Management Committee (RMC), Management Committees (MANCOM), Assets Liability Committees (ALCO), Risk Management Division (RMD), Credit Committee and Internal Control & Compliance Division (ICCD) as detailed below: Board of Directors The Board is responsible for approving and setting Risk Appetite, which is the level of risk the Bank, chooses to take in pursuit of its business objectives. The Board is also responsible for the Internal Control and Compliance Framework. Board oversees, approves and ensures all major risk management policies and parameters taking into account market condition, regulatory requirements and lessons learned in the past. Executive Committee of the Board Executive Committee is responsible to oversee that the management and its committees are operating within approved limits and authorities and that all major risks are managed and mitigated effectively and potential and actual losses arising from risks are within acceptable limits. Annual Report

66 Risk Management Report Audit Committee of the Board The Audit Committee assists Board in meeting its responsibilities for an effective system of financial reporting, internal control and risk management. It has responsibility for reviewing the findings of internal and external auditors and monitoring outstanding actions for timely completion. It is supported by the Bank's Internal Audit function. Audit Committee receives reports on the operation of the risk framework and the risk management processes and systems in place in the Bank. Risk Management Committee (RMC) According to Bank Company (Amendment) Act2013, sec15 Kha, and subsequent BRPD Circular # 11 dated October 27, 2013 a Risk Management Committee (RMC) has been formed by 5 (five) members within the Board in the 541st Board Meeting on December 26, Function of the RMC is to minimize risk regarding Strategic planning & implementation and to accomplish Board functions accurately related to risk. RMC major risks dealing with Loan Risk, Foreign Currency Exchange Rate Risk, Internal Control and Administration Risk, Money Laundering Risk, Information and Technology Risk, Operation Risk, Interest Risk and Liquidity Risk. manage the Bank's risk profile, and that the risk profile fully articulates those risks which may impact the Bank's ability to achieve its objectives. It also ensures compliance with all relevant risk management policies. Assets and Liabilities Committee (ALCO) ALCO supports and advises the Managing Director, on the management of the Bank's Balance Sheet. In the context of the risk framework, it monitors the financial performance and risk profile of the Bank's main financial activities, and of the balance sheet as a whole. Internal Control and Compliance Division (ICCD) ICCD independently verifies compliance with all approved risk management and internal control policies. Deviations are identified, reported and corrected to mitigate risks on a continuous basis and to ensure that the Bank is operating in compliance with all approved and established policies. 4. Risk management A. Credit Risk Management: Duties & Responsibilities of RMC has designed by Risk determination and control strategy, Preparation of Organizational Structure, Review and approval of risk management guidelines, Information Storage & Reporting Process, Supervision of overall Risk Management Guidelines implementation and Miscellaneous issues. Management Committees (MANCOM) MANCOM ensures that the risk framework provides the risk information required by the Bank's senior management to In order to mitigate Credit Risk, AB Bank has taken the following steps: criteria, credit approval process and clear cut responsibilities of individuals associated with approving and administering the credit portfolio of the bank customer s financials, reputation, security etc. to enable the credit approving authority to make a wellinformed decision Credit Risk In Crore BDT RWA for Credit Risk 2013 In Crore BDT Geographical location wise loans positions ,790 12,505 15,338 Dhaka Sylhet Rangpur Chitagong Barisal Mumbai Branch Khulna Rajshahi 65% 25% 3% On Balance Sheet: 77% Off Balance Sheet: 23% 0% 2% 3% 2% 0% Annual Report

67 Risk Management Report and control through approved credit rating agencies which is a good indicator of the financial health of the customers The Bank has segregated duties of the officers/executives involved in credit related activities. A separate Corporate Division has been formed at Head Office which is entrusted with the duties of maintaining effective relationship with the customers, marketing of credit products, exploring new business opportunities, etc. Moreover, credit approval, administration, monitoring and recovery functions have been segregated. For this purpose, two separate units have been formed within the credit division. These are (a) Credit Risk Management Division and (b) Credit Administration Division. Credit Risk Management Division is entrusted with the duties of maintaining asset quality, assessing risk in lending to a particular customer, sanctioning credit, formulating policy/ strategy for lending operation, etc. Adequate provision has been made on classified loans/investments. A thorough assessment is done before sanction of any credit facility at Credit Risk Management Unit. The risk assessment includes borrower risk analysis, financial analysis, industry analysis, historical performance of the customer, security of the proposed credit facility, etc. The assessment process starts at Corporate Division by the Relationship Manager/ Officer and ends at Credit Risk Management Unit when it is approved/declined by the competent authority. Credit approval authority has been delegated to the credit committee. In determining Single borrower Exposure/Large loan limit, the instructions of Bangladesh Bank are strictly followed. Internal audit is conducted at periodical intervals to ensure compliance of Bank's and Regulatory policies. Loans are classified as per Bangladesh Bank's guidelines. Interest accrued on classified loan is suspended and adequate provision is maintained thereagainst as per Bangladesh Bank's Guidelines. Quantitative information: BDT in Crore Total Loan and Advances Total Risk Weighted Assets for Credit Risk: OnBalance Sheet OffBalance Sheet Total Capital requirement for Credit Risk Total provision maintained for Loan & advances B. Market Risk Management ,012 15,338 11,814 3,523 1, ,607 12,505 10,294 2,211 1, This risk emanates from adverse movement of interest rate, foreign exchange rates, equity prices, commodity prices etc. In AB we have the following structure in place for monitoring the trend and taking appropriate measures to maximize margin and minimize risks: other senior management meets periodically to review present and anticipated future market trend and takes appropriate decisions on interest rates and investments check and balance Loan Deposit Ratio Industry Wise Loan Portfolio 2013 Product Wise Loan Portfolio Agriculture: 3% Large and medium scale industry: 28% Working capital: 1% Export: 0% Commercial lending: 33% Small and cottage industry: 1% Others: 66% Overdraft: 15% Cash Credit: 0% Time loan: 30% Consumer Loan: 1% Term loan: 39% Staff Loan: 0% Bills under LC: 0% Trust Receipt: 9% Packing Credit: 0% Loan against accepted bills: 5% Bills Purchased & Discounted: 1% Annual Report

68 Risk Management Report framework for capital market investments Banks market risk objectives are to: Understand and control market risk by robust measurement and the setting of limits Facilitate business growth within a controlled and transparent risk management framework Minimize nontraded market risk to ensure check and balance and regular reviews by senior management Quantitative information: BDT in Crore Total RWA for Operational risk 1,385 1,398 The exposure of market risk of the bank is restricted to foreign exchange risk, interest rate risk and equity position risk. Quantitative information: BDT in Crore Total Capital requirement for Market risk: Interest rate risk Equity position risk Foreign Exchange risk Commodity risk C. Operational Risk It is a risk of direct or indirect losses resulting from human errors, external events, inadequate or failed internal processes and systems, frauds and forgeries etc. We are committed to alleviate this risk through: implemented for all back office functions Total Capital requirement for Operational risk D. Liquidity Risk Liquidity risk is faced by a bank when it is unable to meet its financial obligations when they fall due. It arises when the cushion provided by the liquid assets of the bank are not sufficient to meet maturing obligations. AB Bank has instituted the following safeguards against liquidity risks: other senior management meets periodically to review different aspects of the bank s portfolio with special emphasis on deposits and liquidity position and determines the direction to be taken by the bank AD ratio strictly maintained maturity gaps growth in assets viz a viz liabilities Market Risk In Crore BDT RWA for Market Risk 2013 In Crore BDT Operational Risk In Crore BDT 13 1, , Interest Rate Related instruments: 14.3 Equities: 51.1 Foreign Exchange Position: ,359 Annual Report

69 Risk Management Report E) Money Laundering & Financing of Terrorism Money Laundering and Terrorism are alarming threats worldwide. Economy, political stability, law and order and in some cases the entire country may be destroyed if appropriate measures are not taken to check these risks. Since these risks are directly associated with money, banks have an active role in prevention of money laundering and terrorism financing. Bangladesh Bank has taken a leading role to combat these risks and have already introduced guidelines and policies on AntiMoney Laundering and Combating the Financing of Terrorism. In accordance with these guidelines AB Bank has taken the following steps: Deputy Managing Director who is also the Chief Anti Money Laundering Officer (CAMLCO) Combating the Financing of Terrorism (CFT) have been formulated and disseminated to all employees of the bank account activities and for Auto reporting of Cash Transaction reports create awareness and to be vigilant the internal audit team during their periodic audit of AB Branches 5. Capital Plan and Management The Bank is committed to maintain a strong capital base to support business growth, comply with all regulatory requirements, and obtain good credit rating and CAMELS rating and to have a cushion to absorb any unforeseen shock arising from credit, operational and market risk. Capital Maintenance &. Dividend policy Following important issues are considered for capital maintenance and dividend policy: growth stress The Board is responsible to ensure capital management within a broad framework of risk management. The Bank has been pursuing a dividend policy that must ensure satisfactory return for shareholders as well as sustainable growth of the Bank with strong capital adequacy ratio to protect greater interest of depositors and shareholders. 6. Stress Testing AB Bank prepared Stress Testing Report on Quarterly basis in accordance with Bangladesh Bank Guidelines. We considered the following different risk factors as specified by Bangladesh Bank for the stress testing: i. Credit Risk: a. Increase in NPLs b. Increase in NPLs due to default of Top large borrowers c. Fall in the forced sale value (FSV) of mortgaged collateral d. Negative shift in the NPLs categories e. Increase of NPLs in particular 2 sectors ii. Interest Rate Risk iii. Exchange Rate Risk iv. Equity Price Risk v. Liquidity Risk vi. Combined shock Latest Stress Testing Report based on December 31, 2013 has been approved by the Board of the Bank and accordingly submitted to Bangladesh Bank. Total Capital In Crore BDT Capital Adequacy Total Risk Weighted Assets (RWA) In Crore BDT 1,092 1,466 1,594 1,718 1, % 9.91% 11.37% 11.73% 10.80% 9,846 14,795 14,024 14,649 17, Annual Report

70 Risk Management Report 7. Supervisory Review Process (SRP)Supervisory Review Evaluation Process (SREP) on Internal Capital Adequacy Assessment Process (ICAAP) Supervisory Review Process (SRP) underscores principle that Banks have a process for assessing overall capital adequacy in relation to risk profile and strategy for maintaining their capital at an adequate level. The process involves constitution of two teams viz SRP Team at the Bank level and SREP Team at Bangladesh Bank. Accordingly, Bank formed SRP team which was duly approved by the Board. Supervisory Review Evaluation Team (SREP) of BB is assigned with the review and evaluating of Bank s ICAAP and strategies, as well as ability to monitor and ensure compliance with economic Capital Adequacy Ratio (CAR). Under this process, Bank has to maintain adequate capital in addition to Minimum Capital Requirement (MCR) under Section 13 of Bank Company (Amendment) Act, Adequate Capital Requirement (ACR) is in addition to MCR, for the following risks: Evaluation of Core Risk management Credit concentration risk Interest rate risk in the banking book Liquidity risk Reputation risk Settlement risk Strategic risk Environmental & Climate change risk Other material risk Accordingly, a guideline has been prepared by Bangladesh bank and few credit rating agencies have been recognized for this purpose. In line with Bangladesh Bank requirement, AB Bank has already formed a Basel II implementation Unit to ensure timely implementation of Basel II accord. 9. Risk Management Division As per Bangladesh Bank guidelines, AB Bank has formed a highpowered Risk Management Division (RMD) headed by a DMD for overall risk management of the Bank. The RMD is constantly contemplating and exerting efforts for developing a structure and processes to ensure sound risk management in all areas of the Bank. The Division always follows Bangladesh Bank s risk related directives and works closely with core risk areas dealing Divisions to mitigate the risk. RMD always training to maintain the core risk areas and where risks is high or not up to the mark as suggested by Bangladesh Bank, RMD provides its full effort to fill the loopholes. Meanwhile with the close team work with Financial and Treasury Division, Bank introduced VAR calculation on fixed income & FX position and MAT is under process. In case of ICT, all the issues raised by Bangladesh Bank have already fully complied. A part from these, information relating to Disclosures on Risk Based Capital (Basel II) based on 31 December 2013 as required by BRPD Circular no. 35 of 29 December 2010 is given in AnnexE1 of the audited Financial Statements of the Bank for the year Document on SRP SREP Dialogue on ICAAP based on December 31, 2011 & 2012 has already been approved by the Board of the Bank and accordingly submitted to Bangladesh Bank. A face to face meeting on ICAAP between AB Officials and BaselII Implementation Cell of Bangladesh Bank held on December 19, Basel II & its implementation Bangladesh Bank has taken measures to implement BASEL II in banking sector effective from January 2009 in parallel with Basel 1. From January 2010 it has fully come into force. Bangladesh Bank issued guidelines on Risk Based Capital Adequacy for Banks vide BRPD Circular No. 09 dated 31 December 2008 and subsequently latest amendment on Risk Based Capital Adequacy Circular No. 35 of 29 December 2010 (Revised Regulatory Capital Framework for banks in line with BASEL II). Under standardized approach, Basel II requires the recognition of External Credit Assessment Institution (ECAI) and credit rating of the borrowers. Annual Report

71 DIRECTORS REPORT

72 Directors Report 2013 Bismillahir Rahmanir Rahim Honorable Shareholders Assalamualaikum The Board of Directors of takes immense pleasure in presenting the 32nd Annual Report of the Bank. AB Bank, which started its journey with a single Branch operation at Kawran Bazar, Dhaka in 1982, it celebrated its 32nd year of operation in AB has been able to establish itself as a premier financial house of the country with wide network of branches, an array of products and services, alternative delivery channels (ATMs, Internet Banking, SMS banking etc.) and divergent business activities with good performance. The Bank has been "the epitome of trendsetter" in the banking arena of Bangladesh as it already completed three decades of banking business the first ever private sector bank in Bangladesh to achieve this rare feat. It is an honor for the Board to present the audited Financial Statements of the Bank for the year ended 31st December, 2013 along with the Auditor's Report thereof. The Financial Statements of the Bank have been prepared with an eye to providing the widest possible coverage in terms of compliance with the related regulatory and financial standards and to give a fair view of the business activities in a transparent manner to our shareholders and regulators alike. All subsidiaries and other independent activities of the Bank have been given separate representation in this year s accounts. Total Asset at the end of the year 2013 reached BDT 20,801 crore with a Total Capital base of BDT 1,877 crore. Profit after Tax reached BDT 101 crore at the end of the year which was BDT 144 crore in Dear Shareholders The Director s Report and review contains a brief overview of the world economy alongside the Bangladesh economy and Banking industry scenario. The Report also deals with the Bank's overall performance and activities for Global Economy The global economy is still not yet come out of the Recession of While the US economy shows stronger signs of recovery, with growth and employment picking up buoyed by strong private demand, EU countries are still mired in stagnancy with countries such as Italy, Spain, Portugal and Greece, still in the grip of high unemployment. Germany remains the only high performer with low unemployment and strong exports. Consequently, the Euro area is crawling out of recession, but business activity is forecast to stay moderate also saw a growing number of emerging market economies, including China and India, coming off cyclical peaks. In 2014, their growth rates are projected to remain below the elevated levels seen in recent years, for both cyclical and structural reasons. Japan s economy has shown a sign of strong rebound but is expected to lose steam in 2014 as fiscal policy tightens. The latest IMF World Economic Outlook (WEO) update of October 2013, suggests that these scenarios will result in a rebound in the world economy compared to the minor setback in 2013, with global growth at 3.6 percent in 2014 compared to 2.9 percent in The trade growth is expected to be 4.9 percent in 2014, whereas it was 2.9 percent in This augurs well for the Bangladesh economy which is increasingly relying on export expansion for job creation and income growth. Global Economic Outlook (October 2013) (p) World Output Growth World Trade Growth Source: IMF, World Economic Outlook,October 2013 Two recent developments will likely shape the path of the global economy in the coming year. First, markets are increasingly convinced that U.S. monetary policy is reaching a turning point with quantitative easing set to taper off in coming months. Second, China is likely to grow more slowly over the medium term than in the recent past. The core economies of Europe (e.g. UK, Germany, France) are expected to show some signs of recovery due to higher spending by consumers and firms. But the Southern periphery countries of Europe like Italy, Spain, Portugal and Greece, are expected to remain subdued. Emerging market economies are slowing down and the trend will remain unchanged in If the reasons for this slowdown are structural, emerging market economies might face exchange rate and financial market disruptions with some balance of payments problems as well. Bangladesh Economy Global investment houses like Goldman Sachs and JP Morgan had already gone bullish on Bangladesh, as the frontier five and next11 investment destinations after BRICS, and McKinsey LLC is convinced that Bangladesh was going to be the preferred sourcing choice for leading garment houses of the world for the coming decade. Bangladesh s success story is not just limited to its evolving RMG manufacturing prowess. British magazine, The Economist, echoed the same in its December 03, 2013 publication, Bangladesh has dysfunctional politics and a stunted private sector. Yet it has been surprisingly good at improving the lives of its poor. Nobel Laureate Economist Amartya Sen has gone to great lengths to Annual Report

73 Directors Report 2013 examine the progress in human development in South Asia, arguing, with much exuberance, that Bangladesh with some unique but striking features in its human development strategy stands out well ahead of India in many indicators of human development. The Economist magazine of November 03, 2012, also points to some of the indicators he was referring to. These are remarkable accomplishments, termed Bangladesh paradox by some transformation, as echoed by the highly respected British medical journal, Lancet. Bangladesh Economy in 2013 A serious political turmoil in the second part of the year hit the economy in Besides the political crisis, the one major economic event was the Rana Plaza tragedy which raised significant concerns among European and North American buyers about the poor state of compliance in Bangladeshi garment factories. For the first time, there is a common understanding coming together of leading buyers of Bangladeshi garments in Europe and North America, international agencies like the ILO and UNCTAD, Bangladeshi garment manufacturers, government policymakers, and worker representatives about the urgency of the need to ensure compliance in Bangladesh s 5000 garment factories and improve workers pay and working conditions. To give teeth to this initiative, resources have been mobilized but a serious consequential event tremble the Bangladesh Economythe suspension of GSP privileges for Bangladeshi exporters in the US market. Apart from that, the year 2013 saw the economy s macroeconomic management pretty much on track with most macro indicators related to internal and external balance conforming to developments related to the economic slowdown. Though revenue growth was modest (9.4%) in FY13, fiscal deficit was contained within the prudent limit of 4.4 percent of GDP with bank financing capped under 3 percent. Likewise, slower import growth alongside strong export and remittance growth with favorable trend in aid disbursements kept the balance of payments in positive territory resulting in accumulation of foreign exchange reserves. Thus the macroeconomic scenario in 2013 remained stable and sustainable though in the context of subdued overall economic performance. Revenue receipts Though, in terms of revenue performance, the trend of overshooting the target of the last two years has been reversed with collection being lower in FY13, there was growth in overall NBR revenue of 9.4 percent in FY13 which is almost 10% lower than the growth recorded in the previous fiscal year. The shortfall in revenue has been exacerbated by the importbased revenue which declined due to the predictable slowdown in imports. On the contrary, domestic based taxes were the saving grace with income tax and domestic VAT salvaging the revenue performance. Both components experienced a minor decline in growth but still managed to remain robust. The tax performance is broadly still in line with the targets set in the SixthFive Year Plan and hence is not yet a cause for concern. Notably, the government has clearly given the NBR a vote of confidence for having set targets in FY14 which are higher than those set for FY13 albeit not met. NBR Revenue Growth (%) Revenue Components: NBR tax Custom duty VAT Import Supplementary Import Importbased Revenue Income tax VAT Domestic Domestis Supplementary Others tax Domesticbased Revenue Source: NBR FY FY FY FY FY FY FY The fiscal deficit has been managed very prudently in light of the risk of revenue shortfall exacerbating the planned deficit target. The deficit was contained at 4.4% of GDP, well below the usual target of 5% of GDP, made possible by proportional adjustments in government expenditure in line with revenue collection. There was also a reversal of past trends in deficit financing which was criticized as being overly dependent on domestic sources, particularly bank financing, which had the effect of crowding out private credit flows adversely affecting investment. However, owing to healthy foreign aid disbursement in FY13, the banking sector was spared the additional pressure and the remaining balance was covered by nonbank borrowing which picked up from the dismal performance in the previous year. Inflation Point to point inflation data using the 2005/06 base broadly shows that food inflation has risen steadily from 1.75 percent in September 2012 to 9.00 percent in December The reasons relate to higher distribution costs due to the frequent nationwide strikes, and the fact that Indian food inflation has also risen sharply which is also correlated with Bangladesh food inflation. On the other hand, point to point nonfood inflation is steadily declining, having peaked in October 2012 at percent and has declined steadily to 4.88 percent in December This is due to the adherence to the monetary program and the recent disruptions which Annual Report

74 Directors Report 2013 caused a slowdown in economic activity and lower consumer demand. However, the rise in food inflation is pushing up average inflation which bottomed out at 6.06 percent in January 2013, rose to 6.78 percent in June 2013 and is 7.53 percent in December Current Account Balance (CAB) Current Account Balance (CAB) recorded a surplus of USD 1384 million during JulyNovember 2013 compared to a surplus of USD 433 million during the same period of the preceding fiscal year. The improvement in trade deficit (18 percent export growth along with 4.4 percent import growth) contributed to this and compensated for the decline in remittances relative to JulyNovember Supported by the surplus in CAB and a small surplus in the combined capital and financial account, the overall balance recorded as surplus of USD 2040 million. This contributed to foreign exchange reserves reaching USD 18.1 billion at the end of H1FY14 compared with USD 15.3 billion at the end of FY13. Reserves Bangladesh Bank s gross foreign exchange reserves rose sharply to USD 18.1 billion (nearly 5 months of imports) at the end of December 2013 from USD 12.8 billion a year earlier. Bangladesh Bank accumulated a large amount of foreign exchange through purchases from commercial banks to prevent the taka from appreciating and eroding the country s export competitiveness. The lower demand for foreign currencies from importers also contributed to the central bank s high foreign exchange reserves. Remittance Remittances came in strong at the close of FY13, at $14 billion. However, there are impending risks stemming from a potential decline in remittances as departure of migrant workers peter out. Remittances declined by around 8 percent in the first quarter of the current fiscal year compared to the same period a year ago. Manpower exports also dropped by about 39 percent during the period when 100,249 people went abroad for jobs against 139,647 in the same period last year. Declining manpower exports signify potential future decline in remittance levels as well as growth. Foreign aid disbursement and foreign investments While net FDI inflows increased marginally, net foreign assistance decreased drastically due to the unfavorable political environment. Net FDI stood at USD 673 million in July November 2013, up from USD 664 million in July November Net foreign assistance fell to USD million in July November 2013, down from USD million in July November Capital Market On the governance front, a significant development has been the demutualization of both Dhaka Stock Exchange and Chittagong Stock Exchange, with a view to minimizing conflicts of interest by separating ownership and management of these bourses and placing a majority of independent qualified directors on the two boards. Demutualization separates trading and ownership rights diversifying the exchange's shareholder base. This major development brings the Bangladesh stock market in tune with most bourses in South and East Asia, as well as some of the leading exchanges in the world. Both DSE and CSE passed a volatile year in 2013 despite a positive ending of the broad share price index for the first time in last three years amid mounting political tensions. The market saw a bullandbear game of domination throughout the first half of the year while the second half saw the market hovering around the same points on the price index trying to find a direction. The DSE main index DSEX started the year at 4, points and closed at 4, It gave investors some solace as they became hopeful of a comeback in On As % of Total NBR Revenue Shifting trend in Tax Reliance 13% 11% 9% 7% 5% 3% 1% Inflation (2005/06 base) General Food NonFood General (12Month Average) International Reserve 2013 USD Billion FY01 FY09 FY10 FY11 FY12 FY13 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Importbased revenue (%) Domesticbased revenue (%) Annual Report

75 Directors Report 2013 the other hand, the DS30 index of blue chip companies, formerly DSE 20 index, remained flat in the negative zone. It slipped by 0.46 percent in the year. All other marketrelated indicators suffered the jolts modestly during the period. The average daily trade value dropped by 4.76 percent to BDT 4.0 billion against last year s average of BDT 4.20 billion. The total market capitalisation of the DSE went up by percent while the ratio of market capitalisation to GDP was in 2013 against in The market weighted average ratio for the DSE stood at against Fifteen new securities were listed with the DSE in They raised BDT billion through initial public offerings (IPO). The empowerment of women and the reach of NGOs have contributed to Bangladesh s remarkable success in healthcare, which has included significant improvements in the survival of underfives, immunisation coverage and tuberculosis control, according to the Lancet. Mobilebased IT penetration has become common in the economic pursuit of progress in Bangladesh. An almost cultlike devotion to IT has been among the driving forces behind the country s growing economic development in recent years. Mobilebased IT is now the epitome of digital development in Bangladesh with 11.5 million subscribers in Mobile Financial Services (MFS). Sovereign Rating The government s initiative of compensating the retail investors who lost money during the market downswings in 2011, gave the investors some confidence in the last half of the year. The first instalment of BDT 3.0 billion out of the BDT 9.0 billion refinance scheme for the affected retail investors was released to the Investment Corporation of Bangladesh (ICB) on August 26 last for disbursement through merchant banks and stock brokers. But the merchant banks and stock brokers drew poor response from the retail investors because of tough conditions attached to it, sources said. Bangladesh SocioEcomony in 2013 According to Legatum, a Londonbased think tank, Bangladesh surpassed India in many economic parameters including asset, growth, standard of living, life expectancy, malnutrition, sanitation, secondary education, security etc placing it 103 rd position while India is ranked in 106 th. Healthcare in Bangladesh also soars despite widespread poverty, study shows. Bangladeshi women hold key to success as infant mortality plunges and life expectancy climbs to 68.3 years, says Lancet, British medical journal. Based on the Bangladesh s strong & stable growth supports with the recovered macroeconomic stability through surplus of current account balances and by the declined trend of inflation in 2013, two foremost rating company S&P and Moody fixed the country s outlook Stable. Rated by Rating Outlook S & PStandard & Poor s BB Stable Moody Ba3 Stable For rating of upcoming years, it is mandatory to keep labor oriented industry sound & safe, infrastructural development and investment friendly environment is also necessary as well to maintain the stable rating position. Banking Industry in 2013 and 2012 Despite festival season and the central bank s financial year closing, the interbank call money market rate remained stable as the central bank maintained close monitoring of the money market s daytoday liquidity position and credit demand was lower due to the sluggish business environment. The interbank call money rate was 7.1 percent, on a weighted average basis in December 2013, down from 9.3 percent in December Remittances Migrant workers going abroad Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 27% Loan Mix % 1% 69% July 12 Oct 12 Jan 13 Apr 13 July 13 Oct 13 FY12 FY13 FY14 Bill USD Source: Bangladesh Bank Growth No.of Persons going abroad Source: Bangladesh Bank Growth Corporate SME Retail Staff & Others Annual Report

76 Directors Report 2013 Monetary tightening measures had little impact on the liquidity position of the banking system as scheduled banks excess liquidity remained high at BDT billion at the end of November 2013 up from BDT billion at the end of October The sluggish business activity and high lending rate set by commercial banks reduced demand for credit, contributing to the buildup of liquidity in the banking system. The outstanding borrowing of the government through sales of national savings directorate certificates stood at BDT billion at the end of November 2013, up from BDT billion a year earlier. The weighted average lending rate declined slightly to 13.5 percent at the end of December 2013 from 13.9 percent at the end of December The deposit rate remained the same at 8.4 percent, becoming positive in real terms because of lower inflation. As a result, the interest rate spread of the banking system narrowed from 5.5 percent in December 2012 to 5.1 percent in December Financial soundness indicators showed gross nonperforming loans (NPLs) at 8.93 percent in 2013 which was percent in 2012 as the percentage of total loan outstanding. Poor credit decisions, bank frauds, slower economic activity, and the end2012 tightening of loan classification standards contributed to the weakened financial soundness. In view of the significant capital shortfall, the government has disbursed BDT billion to help four stateowned commercial banks. Bangladesh Bank adopted a six month long loan rescheduling policy for banks and financial institutions to enable the businesses to reschedule their classified loans by giving a relaxed down payment. Trade Finance, Post Import Finance etc. The division also provides Loan & Equity Syndication, Corporate Advisory services and Structured Trade solutions through Structured Finance. Corporate Loans in 2013 has experienced growth of 45 percent over Protein House Ltd., financed by Board Bazar Branch AB Bank Ltd. AB s Business 2013 Corporate Business AB Bank offers a full array of Financial Services to Corporate houses and Institutions. Corporate & Structured Finance Division, a strategic business unit, has been striving on to provide sharper focus and intimate care to this major revenue generating source. Corporate Loans currently represent 69% of total credit portfolio of the Bank covering wide range of industrial and business houses of the country. In view of complexities and intricacies of corporate financing, Bank maintains close relationship with the clients to provides customized products & services including Working Capital facilities, Noorani Dying, financed by AB Bank Ltd. With slow revival of economy, AB Bank has been following growth strategy for corporate portfolio with dominant presence in manufacturing particularly in RMG, Textiles, Food & Beverage, Steel & Metal Industries, Ship Building, Ship Scrapping, Real Estate, Printing & Packaging, Pharmaceuticals, Telecommunication, Power etc. These have been major areas of interest for corporate business. In respect of Syndication loan, Bank has participation in 25 (twenty five) venture, out of which we are lead arranger for 9 (nine). Corporate Loans In Crore BDT 5, , , , , Sectoral Exposure 2013 Transport, Agriculture, 2% Storage, 3% Power Gas, Others, 6% Water, 3% Banking & Housing, 4% Insurance, 1% Constructions, 4% Professional & Misc., 1% Industrial Loan Mix 2013 In Crore BDT Food & Beverage Ship Building Ship Breaking Livestock, Poultry & Fish feed Jute Products & Processing Cement Oil Refinery Electrical Machinery, Electronics Goods Mfg & Others Steel, Metal industries & Others Pharmaceuticals Chemical & Chemical Products Rubber & Products Printing & Packaging Paper & Paper Products Leather & Leather goods Trade Service, 29% Industry, 45% Furniture & Fixture Footwear & other wearing Apparel Textile RMG 1, Others Annual Report

77 Directors Report 2013 AB Retail Alternative Delivery Channels Nearly three decades of service with a wide range of products blended with latest technology, is poised to steer ebanking with 88 Branches and 235 ATMs under CashLink Bangladesh Limited (CBL) network, located at urban and rural areas around the country. To ensure seamless service, ABBL has invested an extensive amount in mounting its ebanking infrastructure. In 2013, existing Card Division has been merged with IT Division and formed a new Information Technology & Electronic Business Division with a view to providing accelerated service to our valued customers. used latest NCR branded ATMs throughout the country with 24X7 video vigilances on these ATM Booths. ABBL customers can avail the services like Cash Withdrawal, Balance Inquiry, PIN Change and Mini statement. Customers of other Banks can enjoy the ABBL ATM facilities. AB Bank has introduced the first ever embossed Visa Debit Card in the country with two different flavorsvisa Debit Silver for Elite Customers and Visa Debit White for regular customers. These cards are accepted at more than 5,000 retail outlets through Visa POS Terminals across the country. To provide more enhanced service to our customers, AB Bank Limited has changed its Switch and Card Management Software in AB Bank has also started accepting MasterCard branded cards at AB Bank ATMs. With the accelerated growth of mobile phones and to penetrate a large unbanked population in Banking, Bank has introduced SMS Banking. Through this channel AB Bank customers can avail services like Balance Inquiry, Mini Statement, PIN Change, Fund Transfer and Mobile Bill Payment respectively. For the first time in the country, AB Bank Limited introduced Mobile Balance Recharge facility through SMS in Through this service, SMS Banking customers can recharge not only their own mobile balance but also can recharge mobile balance for their near and dear ones by debiting his/her account. This service is operational 24 hours a day. ABBL has established a call center where ABBL customers can get the answers for any Banking related queries. In 2013, Bank has also introduced short code so that a customer can call at this number from any mobile phone conveniently. Setup of Interactive Voice Response (IVR) in the Call Center is one of the priorities for AB Bank in the near future. Consumer Banking AB Bank offers a complete range of retail and personal banking products and services through its network of 88 branches across the country. A thorough understanding of customer needs has helped AB to successfully develop flexible and customized products to meet the market demand. Consumer Banking Division of AB is spreading its presence in the banking arena with various deposit and asset products. An effective sales team also contributed in both Deposit and Asset in After restructuring, the Recovery and Collection team under Consumer Banking Division has also played a key role in managing the total asset portfolio. The team recovered BDT 35 crore in year Liability Products A new deposit product SmartSaver, online savings account was launched on September 15, 2013; which brought in deposits of BDT 9.32 crore in 1,400 accounts. AB Bank is very much market competitive with the following liability products: MaxSaver Savings SmartSaver FSP Liability Products FDR Deposit Products Schemes MSA MSDS SND Current MDS DDS Progati Annual Report

78 Directors Report 2013 Liability Performance in 2013 In the year 2013, the volume of liability products was BDT 2,046 crore higher compared to that of 2012 which is considered as an inspiring performance, from BDT 13, crore to BDT 15, crore. The following table shows the deposit mix in Performance of Consumer Banking Center: Consumer Banking Centre was set up at 17 different branches strategically located at three regionsdhaka, Chittagong & Khulna. In 2013 total no of accounts booked through these 17 centers were 4312 and total deposit procured was BDT 463 crore. policy guidelines, customized products for customers, consolidated database, compliance culture etc. have led the SME Division to further higher platform of SME Banking in the country Priorities customer Asset Products Financial Highlights AB has a wide range of Asset products to meet customer demands which is highly market competitive. Loans under Consumer Credit Scheme are: Asset Performance in 2013 Total outstanding in CCS Loans as of December 2013 is BDT crore which is 3.29 percent of the total LDOs of the Bank. SME Business SME Division is the focal point of all SME related issues, programs, projects and is also responsible for providing best financial solutions to its customers. Management s strong commitment towards SME Banking, appropriate Objectives 2014 trends, market potential Refinance Schemes monitoring & followup Consumer Loans Outstanding In Crore BDT Achievement in 2013 on Retail loans % Deposit Mix in % 10% % in Retail Loan Category 94.54% 5.46% 11% 14% 57% Standard Overdue FDR SND SB CD Schemes & Others Annual Report

79 Directors Report 2013 SME Products & Facilities OVERDRAFT TERM LOAN TERM LOAN LETTER OF CREDIT TRUST RECEIPT LOAN AGAINST ACCEPTED BILL SME Delivery Channel fundamentally in Crop, Fisheries, Solar Energy, Biogas, ETP, Livestock areas. AB also financed in agricultural Credit at concessional Interest rate for the purpose of Cultivation of Pulses, Oil, Seeds, Spices and Maize. Total Outstanding in Agri Loans as of December 2013 is BDT Crore which is 2.06 percent of the total LDO of the Bank. Through the Bank s existing network of Branches as well as tieup with micro finance institutions, Bank disbursed BDT crore in FY and disbursed BDT crore in FY SME Delivary Channel Dhaka Region Chittagong Region Sylhet Region North Region South Region 35 Branches 04 SME Center 26 Branches 04 SME Center 10 Branches 01 SME Center 09 Branches 01 SME Center 07 Branches 01 SME Center Agricultural and Rural Credit/Financing AB gradually increased its portfolio in agricultural & rural credit and has earned appreciation from Bangladesh Bank for achieving the target since The financing are Rangpur Jute Mills Ltd. financed by Rangpur Branch. Investment Banking Division (IBD) Participation in SME Bankers Entrepreneurs Conference at Rajshahi on October 01, Investment Banking Division (IBD) was established to formalize the capital market operations of the Bank under one umbrella in the year With the formation of the two subsidiaries viz AB Investment Ltd. (ABIL) and AB Securities Ltd. (ABSL) recently, role of IBD has been transformed into a Strategic Unit and also a Functional Unit to deal with business which will be centrally driven. IBD is also entrusted with the Portfolio Investment of the Bank. At the same time, IBD will continue to provide onestop service to NRB s and Foreign Investors SME Loan Products SME Loan Outstanding In Crore BDT SME Loan Disbursement In Crore BDT CHHOTOPUJI GATI SPECIAL SATHI PRODUCTS PROSHAR ,964 2,691 3,018 3,174 3, ,744 3,222 3, ,430 DIGUN UDDOG AWPARAJITA YEAR YEAR Annual Report

80 Directors Report 2013 interested to invest in Capital Market here. In its destined role of strategic support, IBD shall be the platform for coordination for Capital market Subsidiaries of AB besides being the vehicle for strategic Investment of the Bank in future. AB s last six years portfolio Investments (Quoted shares) are shown below: Year in Crore Investment Banking Division (IBD) continued its operation with a vision to cater various needs of the investors in the Capital Market. Keeping in pace with AB s vision of innovative banking. IBD also extended services for the Portfolio Management needs of NonResident Bangladeshi (NRBs) and foreign investors and also facilitated remittance in the local capital market through NRBIDA, FC and NITA account facilities. As a valueadding option AB also has Custodian Wing under a separate License in operation from the year st Mutual Fund Bank approved participation as a Sponsor in the AB Bank 1st Mutual Fund to the tune of BDT 30 (thirty) crore having fund size of BDT 150 crore. Bangladesh Securities & Exchange Commission (BSEC) gave permission to float the Fund in the revised fund structure on June 26, Public subscription started on September 25, 2011 and closed on October 20, The fund has been listed with Dhaka and Chittagong Stock Exchange on January 29, On the close of operation on February 06, 2014, the Fund has reported Net Asset Value (NAV) of BDT per unit on the basis of current market price and BDT per unit on the basis of cost price against face value of BDT whereas total Net Assets of the Fund stood at BDT 1, million on the basis of market price and BDT 1, million on the basis of cost price after considering all assets and liabilities of the Fund. OffShore Banking Unit (OBU) Bank received the permission from Bangladesh Bank to operate an Offshore Banking Unit at EPZ Branch in Chittagong in December Subsequently, AB s Offshore Banking Unit commenced its operation from April, Given below is the highlight of the business performance of the OBU wing of the Bank for the financial year 2013: Amount in Crore BDT BDT Operating Profit Deposits Borrowings Loans and Advances Total Assets Primary Dealership Bangladesh Bank approved AB as a Primary Dealer (PD) in December 2009 aiming to boost the country s secondary securities market. Inclusion of AB as PD is part of the latest move to increase the number of market makers to bring dynamism in the secondary securities market. ICCD Internal Control & Compliance Division (ICCD) includes three fold functions viz. Internal Audit, Monitoring and Compliance. ICCD conducts Risk Based Audit and Annual Audit of the Branches. Audit of Head Office Divisions also come under ICCD. ICCD monitors compliance of Internal as well as Bangladesh Bank Audit Reports including Bangladesh Bank Special Audit Reports on Core Risks. Besides, Special Audit on some specific issues like yearend Cash Position, Security Stock verification etc. are also done. Internal Audit in 2013 completed: Risk Based Audit of Branches Annual Audit of Branches Special Investigation : 86 Branches : 86 Branches : 18 Numbers Sme Portfolio Segmentation 2013 Agri Loan Disbursement In Crore BDT Portfolio Investment In Crore BDT 8% 29% 23% Medium (59%) % 30% 8% Small (41%) Service (10%) Trading (59%) Manufacturing (31%) FY FY FY FY FY FISCAL YEAR Annual Report

81 Directors Report 2013 AntiMoney Laundering (AML) Activities 2013 In recent years Money Laundering & Terrorist financing have emerged as an alarming financial crime in the global economy. Hence preventing money laundering and terrorist financing has become imperative for the global financial system. Combating money laundering and terrorist financing therefore, is a key element in preservation and growth of a strong, sound and stable financial sector. Bangladesh Govt. time to time promulgated acts to combat money laundering and terrorist financing. Lastly AML Act2012 & Anti Terrorism (amendment) Act 2013 were passed in Parliament. In connection with AML & Anti Terrorism law of the land & guidance notes on prevention of money laundering of Bangladesh Bank, AB Bank is committed towards applying all local and international standards as well as strict adherence of AML & CFT policies. We follow the highest standard of AML & CFT and ensure strict adherence to these standards by management and employees of our institution to prevent use of our product and services for money laundering & terrorist financing purpose. We at AB Bank are committed to assist the authorities to combat the threat from money laundering & terrorist financing and will continuously thrive to prevent the same. In order to combat money laundering & terrorist financing, we impart proper training to all officers which is mandatory. With this end in view AB Bank provided formal AML & CFT training all the officers of the Bank & refresher training was also been given as per regulatory instruction. In 2013 AB Bank as per decision of Board of Directors organized AML & CFT related trainings to the Senior Management of the Bank as well. One of the basic pillars of strong AML program is effective transaction monitoring. Due to the diligence exercised by the Bank we have regularly reported suspicious transactions to BFIU, Bangladesh Bank in So far the Bank has reported 55 (fifty five) Suspicious Transactions (STR) to Bangladesh Bank. The most important element of a successful of AML program is the senior management commitment. Every year a message from the President and Managing Director s office goes to all employees of the Bank reiterating the importance of AML and CFT & the responsibilities of Bank officials. AB Bank complies with the BFIU, Bangladesh Bank s instruction issued time to time & keeps all employees aware for meticulous compliance of the instructions. AB Bank acknowledges and supports the increasing need for a partnership between the government, Bangladesh Bank, Law enforcement agencies, Commercial Banks and general public to work together to combat money laundering and terrorist financing. AB Bank is determined to play appropriate role in this partnership. IT Division AB Bank IT Division is taking forward the horizon of AB through rolling out initiatives, upgradations, system consolidations among others and providing a platform for facilitating best possible customer service along with enablement for execution of strategic business needs. The rapidly evolving banking needs have also led AB to give increased focus on information technology dependent products and solutions by adapting to state of the art technology platform. Primary objective of the automation strategy is to optimize the business processes to reach customer in real time with their preferred banking channels and provide value innovation to achieve optimum customer experience. Major IT Division initiatives in 2013 included among others: Center and Disaster Recovery Site Internet threat protect AB Bank Data Center and Disaster Recovery Site from fire and water which is the first time for any financial institution in Bangladesh Customer can dial to get help from Bank with AB Bank Data Center In house software developed for Corporate Salary Disbursement Annual Report

82 Directors Report 2013 Operations Division Operations Division is entrusted with overall operations management of the Bank. The primary objective of operations is to ensure a high level of product and service delivery from all AB Branches within a control culture. Like the previous years the Division undertook different initiatives for Among these noteworthy are: network expansion, branding, enhancement of facilities, systems and process improvement, developing and instilling a compliance culture and improvement of service delivery standards. In addition the division was also entrusted to hold different events, which were successfully supervised and monitored by the Division. In 2013 Head Office Operations undertook and successfully implemented the following initiatives: Mr. M. A. Awal, Director of AB Bank opened 89th Branch on December 26, 2013 with the presence of some other Directors Reengineering of processes to improve operational efficiency and control Procedures (SOPs) e.g.: Handling of Emergency Situations in the Bank's Head Office, Branches & ATM Booths. Operating MICR Cheque Scanner Machine & Roll out to all branches to protect fraud cheques. Revised Matrix for obtaining documents from Customer/Applicant s photo identification while opening any Bank Account. supervision in order to mitigate risk through Operational Risk management & Regulatory Compliance introduced Revised Guidelines to break open the lockers of Defaulting Locker holders and/or lockers which have not been operated for over 10 years branch officials relating to Customer Service Excellence, Communication & Interpersonal Skills, Negotiable Instrument Act, Cash Management, Account Opening and Local Remitance etc. Gabtoli, Mirpur, Dhaka and different part of the country during EidulAzha Association of Bangladesh (HAAB) and Electronic Government Procurement (egp) system of CPTU under Ministry of Planning Branch Network Expansion Chaturi Branch was opened by Regional Head of Chittagong Region, ABBL, Senior executives, Local elites and dignitarias were also present on the occation Registration with Electronic Government Procurement (egp) system of CPTU under Ministry of Planning signed a Memorandum of Understanding (MoU) regarding Registration with Electronic Government Procurement (egp) System with Central Procurement Technical Unit (CPTU) of Ministry of Planning. AB intends to have its presence in every district of the country in phases. Acquisition of land strengthened the Bank s capacity for conducting operation from own premises with much more flexibility to provide service. With this end in view AB Bank opened its 88th Branch at Chaturi, Chittagong in its own purchased property. The Bank s 89th Branch at Banani, Dhaka was also opened during the year. Mr. Shamim Ahmed Chaudhury shaking hands with Mr. Amulya Kumar Debnath Annual Report

83 Directors Report 2013 Under the MoU, CPTU will provide EGP Portal Dashboard and training to nominated focal persons of the bank in egp portal link as the epayment service provider. As member bank AB Bank will provide services like registration/reregistration of bides/tenders and sell tender documents on behalf of Procuring Agencies (Pas) and Procuring Entities (PEs) within the territorial jurisdiction of the Bank. Mr. Shamim Ahmed Chaudhury, President & Managing Director, and Mr. Amulya Kumar Debnath, Director General, CPTU, signed the MoU on behalf of their respective organizations. Mr. Mohammad Mejbahuddin, Secretary IMED, Ministry of Planning, Government of Bangladesh attended the MoU signing ceremony and presided over this function. Human Resources Management (HRM), the first Private Sector Commercial Bank of the country is moving forward with a vision of converting human resources into human capital through the processes of providing appropriate knowledge, skills, abilities and personal attribution. By developing and strengthening the core competencies of our human capital, valuing their unique perceptions and enabling them to contribute positively to our success, ABBL provides opportunities for individuals to fulfill their latent talent. Human Resource Strategies (Promotion, Increment, Incentives etc.) on the basis of Performance, Employee Engagement Events, skill and competency development Assessment Strategy aligned with mission, goals, and organizational objectives and integrated into its strategic plans, performance plans, and budgets Workforce Diversity Total Workforce by Age Group: Age Group Above 55 Years Years Years Years Below 25 Years Total Total Workforce by Age Group (2013): Age Group Above 55 Years 4555 Years 3545 Years 2535 Years Below 25 Years Total Total Workforce by Gender: Year/Sex Female Male Total Performance Management System & Job Description, constant focus on serving the customers in each every horizon advantage, working with teams from different background as AB Family the best talents as a mean of expanding the business As a business partner, to create a sense of accountability among the AB employees, we provide opportunity to them based on a shared commitment to devote their talents to benefitting the business and to develop the own Recruitment and Selection The Recruitment and Selection process of dynamic and transparent and always focused on attracting the high potential individuals. Bank employs highly distinguished consultancy firm to professionally conduct the assessment of fast tracker recruitment at the entry level. The fast trackers are the Total Workforce by Age Group 2013 Total Workforce by Gender Trainings at AB Bank Ltd Above 55 Years Years 3545 Years Years 22 2,187 Below Total 25 Years Total No. of People Female Male Total ,638 1,608 1,701 2,096 2,070 2,187 10% 0% 90% lnhouse Training External Training (Local BlBM andother) External Foreign Seminar/ Workshop/ Conference Annual Report

84 Directors Report 2013 Management Trainees (MTs) who are groomed and nurtured to take over the future leadership position. Bank also recruits fresh graduates to perform the jobs of basic operational level in the capacity of Trainee Officers (TOs). Besides, Bank is focused on recruiting the proven leaders as lateral entrants. AB also participates in job fairs at reputed academic institutions as part of employer branding. AB Bank Training Academy: A House That Facilitates Learning: Training at AB is coordinated through AB Bank Training Academy. Training Academy is aimed at enhancing the employees job related knowledge, skills and managerial competencies. Each year, the Bank invests significantly on employee development and training both at home and abroad Training Organized Number of Participants 2013 InHouse Training 2,108 External Training (Local BIBM and others) 226 External Foreign Seminar/ Workshop/ Conference 11 Total 2,345 Treasury Functions Being an integrated unit AB Bank Treasury manage day to day Liquidity, Interest rate and Foreign Exchange Risks. AB Bank Treasury is engaged in Fund Management both in LCY and FCY. To manage the fund it participates in the interbank market within the laid down policies and guidelines of Bangladesh Bank s. It also invests in Govt. Securities to meet the regulatory compliance. As a Primary Dealer, AB Bank perform its core responsibility to underwrite Govt. Securities by this division. Treasury division is broadly divided into ALM and Foreign Exchange desk. Treasury Operations primarily maintain the statutory requirements. Prudent Money Market and Foreign Exchange Operations however contribute significant interest and exchange earnings. Year 2013 was a challenging year of Treasury in terms of managing FX Risk, Interest Rate Risk and Liquidity Risk of the Bank in the midst of a sluggish economy. Throughout the year 2013, the Interbank money market was stable and short term money market rates were on the lower side. In the year 2013, there was no CRR/SLR short fall and no breach of Net Open Position (NOP) limit though the market was too volatile. Treasury successfully used all types of money market and foreign exchange instruments to efficiently manage the funds to ensure optimum Balance Sheet spread. Financial Institutions Unit FI marketing team facilitated trade business on behalf of AB Bank Mumbai branch and AB International Finance Limited (ABIFL), Hong Kong. FI Marketing is primarily engaged in harnessing Reimbursement Authorities/ Payment Instructions and scouting of LC advising from different commercial Banks for Mumbai Branch. For ABIFL this marketing team procured foreign trade related business like advising LCs, confirmation of LCs and discounting of bills. AB holds the major share in this line of business. International Trade International Trade has significant value addition to AB s business profile. In 2013, Both Import and Export business experienced growth compared to previous year. Import Business reached BDT 12,538 crore which was BDT 10,037 crore in Import bucket of AB covers areas like scrap vessels, food items, chemicals, medicines, textiles, capital machineries etc. Total Import growth was 25 percent in the year Total Export growth of AB was 10 percent in the year 2013 compared to the previous year. Total Export reached BDT 7,257 crore at the end of the year which was BDT 6,578 crore in Export business was concentrated in frozen fish, readymade garments, knitwear and other indigenous products. AB s Foreign correspondent relationship covers most of the important financial centers and financial institutions. About 521 correspondents comprises correspondent banking platform of the Bank facilitating its expanding international trade business and customer service. To accommodate economic expansion, Bangladesh Bank has taken several liquidity measures, which are as follows: point. In 2013, repo rate was 7.25 percent and Reverse Repo was 5.25 percent concentration on longer term maturity in focus of easing liquidity pressure on PD banks To reduce devolvement pressure of Govt. Securities on PD Banks, Bangladesh Bank introduces devolvement on NonPD s a certain portion of the unsubscribed securities in the primary Auction 8 new banks started operations as Primary Dealers in 2013 Remittance Initiative AB strengthened the existing remittance relationship with various exchange houses in AB is focusing on enhanced customer services through the existing Branches. Dedicated Remittance Hub centrally located at Head Office backed by advanced technology platform helped expanding the Bank s service to the doorstep of the customers. Corporate clients of AB remained another major source of foreign currency. Bank is also trying to broaden its base through solicitation of indigenous export clients. Total remittance at the end of the year stood at USD 236 million in 2013 as against USD 217 million in Annual Report

85 Directors Report 2013 Activities of FI Marketing Team Mumbai Branch, India is the only Bangladeshi Bank based in Mumbai catering to IndoBangla Trade. Since its inception in the year 1996, in addition to retail banking activities, it is engaged in handling LCs and documents arising out of exports from India to Bangladesh. The Branch also handles add confirmation, negotiation and discounting of documents among others. Our FI Marketing Team, formed on 20 July 2003, facilitates trade business activities originating from the different Banks in Bangladesh. The operations of our FI Marketing Team are a fee based income infusing foreign currency to our national economy. At present our Mumbai Branch is maintaining Nostro Accounts of 40 Banks in Bangladesh. During the year 2013, our FI Marketing Team has collected a good number of Reimbursement Authorities/Payment Instructions and provided support in advising a significant number of LCs from different Commercial Banks in Bangladesh to our Mumbai Branch, India. AB International Finance Limited, Hong Kong a wholly owned Subsidiary of, having started its operations in the year 1995 is primarily engaged in advising, adding confirmation to documentary credits, negotiation and discounting of bills under LC. Our FI Marketing Team procures foreign trade related business i.e. arranges advising of documentary credits and arranging confirmation to LCs of different Banks in Bangladesh on behalf of ABIFL, Hong Kong. Overseas operations Mumbai Branch, AB Bank, India, Mumbai Branch is the only Bangladeshi Bank based in Mumbai which caters IndoBangla trade. The Branch was established in the year 1996 and since inception, in addition to corporate banking services. it is engaged in handling LCs and documents arising out of exports from India to Bangladesh. The Branch also adds confirmation, negotiate and discount documents. Mumbai Branch is connected to AB s central network system to provide an advanced technology platform for the Branch s operations. Branch s Operating Profit at the yearend 2013 was INR million. Major KPIs of the Branch in 2013: Basel III CRAR Overall 33.87% 26.28% 35.17% CRAR Tier I 33.59% 25.70% 34.45% CRAR Tier II 0.28% 0.58% 0.72% Operating Profit to Total Working Funds 8.15% 6.49% 12.69% Fee based income to Total income 73.93% 82.90% 83.87% Return on Total Assets 4.78% 5.45% 5% Operating Results of Mumbai in 2013: Particulars Operating Profit INR Million Return on Assets (%) 4.78% 5.45% 5.00% Return on Equity (%) 10.86% 12.88% 10.08% AB International Finance Limited (ABIFL), Hong Kong ABIFL started its operations in 1995 and in primarily engaged in advising, adding confirmation of documentary credit, negotiation and discounting of bills under LC. ABIFL is also involved in remittance business. ABIFL's performance in 2013 was satisfactory all round. Operating results of ABIFL in 2013: Particulars Profit AfterTax (PAT) HKD Million Return on assets (%) Return on equity (%) Earnings per Share HKD Mumbai Branch Return on Assets 5.45% Mumbai Branch Operating Profit INR ln Million ABIFL Profit After Tax HKD ln Million % 4.78% Annual Report

86 Directors Report 2013 Local Subsidiaries AB Investment Limited After incorporation on 24 December 2009 AB Investment Limited (ABIL), a wholly owned subsidiary company of, started its operation on the 10 March Clients of ABIL avail the following services: Portfolio Management lnvestors Discretionary Account (lda) Management s Discretionary Account (MDA) NonResident Bangladeshi lnvestor s Discretionary Account (NRBlDA) Underwriting lnitial Public Offer Repeat Public Offer Right lssue Bond lssue The number of clients of AB Investment Limited is about 2,705 and it comprises of Local Individual & Institutional clients along with NRBs and Foreign Individuals. ABIL has six panel brokers to perform trading of its clients and of own portfolio. Total portfolio of ABIL was more than BDT 9.74 billion in 2013 which is 0.37 percent of the total market capitalization. Currently, ABIL operates from its Head Office in Dhaka and two branch offices in Chittagong & Sylhet. Performance of ABIL: ABlL s Services lssue Management lnitial Public Offer Repeat Public Offer Right lssue Bond lssue Preference Share lssue Corporate Advisory Private Equity Private Placement Financial Modeling Project Appraisal Amount in Crore Number of Clients 2,705 2,749 2,886 Margin Loan provided to Clients Operating Income Operating Profit Profit after Tax (PAT) Earnings Per Share (BDT) Face Value (BDT) AB Securities Limited (ABSL) After incorporation on 24 December 2009, AB Securities Limited (ABSL), a wholly owned subsidiary company of, started its operation on the 02 August ABSL is a TREC Holder of both Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. The number of clients of ABSL is more than 2,600 and it comprises of local individual & institutional along with NRBs and foreign individuals. ABSL also acts as Agent Broker of two Merchant Banks namely AB Investment Limited and First Security Islami Capital & Investment Limited. Total turnover of ABSL was more than BDT billion in Currently, ABSL operates from its Head Office in Dhaka and two branch offices in Chittagong & Sylhet. For Foreign Nationals and NonResident Bangladeshis, we provide one stop stock broking services including assistance in opening Foreign Currency (FC) account & NonResident Investor s Account (NITA), BO account opening and trading at DSE and CSE. Performance of ABSL: Amount in Crore Number of Clients 2,636 2,472 2,525 Margin Loan Disbursed Operating Income Operating Profit Earnings Per Share (BDT) Total Turnover Trade (Billion BDT) AB Exchange (UK) Limited AB Exchange (UK) Limited, London, UK, a 100 percent owned subsidiary of has commenced its operation with effect from 31 May AB Exchange (UK) Limited is engaged in Remittance Business and facilitating expatriate Bangladeshis residing in UK to send their remittances through official channel Performance of ABIL In Crore BDT Performance of ABSL In Crore BDT ABSL Services CDBL Services BO A/c Opening ABSL s Services Trading DSE & CSE Operating Income Operating Income Operating Profit Operating Profit Safe keeping Margin Loan Annual Report

87 Directors Report 2013 in a secured, reliable and expedient manner. In addition to 89 branches of ABBL, Bangladesh, designated branches of BURO Bangladesh and designated CCPs of Pacific Bangladesh Telecom Limited are acting as distribution channel of ABEL. CashLink Bangladesh Limited (CBL) CashLink Bangladesh Limited (CBL) is a subsidiary of AB Bank Limited. CBL was incorporated on 24 September 2008 with the following objectives: financial payment to AB and other member Banks coordination and deployment of independent branded Automated Teller Machines (ATM) POS) and provide prepaid Card, Debit Card and Credit Card processing services etc. CBL s vision is to become the largest shared ATM & POS network in Bangladesh. Currently CBL is providing Electronic Fund Transfer services through ATMs and POS throughout the country. Credit Risk Management (CRM) Credit risk of the Bank is governed by the CRM Division following Credit Policy Manual and other guidelines of Bangladesh Bank issued from time to time. Bank has identified credit portfolio into Corporate, RetailConsumer Credit and Cards and SME in the overall. There are separate policies for each such sector with clearly defined units for exposure and risk management aspects. Bankwide credit processing matrix is in place which is spread up to the Branch level. Clear segregation of relationship and credit processing streams across the Bank has been ensured to assure credit risk management covering the entire credit cycle. This setup has also ensured sound practices in credit processing/appraisal, credit approval, credit documentation, credit disbursement, credit administration, monitoring and control. Credit Administration Management (CAM) Bank has a separate unit called Credit Administration Management (CAM) for Credit Administration and handling of classified loans. Banks entire CRM process is automated and linked to the Bankwide core system which enhanced the reach of (AM unit further. Side by side with the automation of Trade Finance Module, AB is moving towards an integrated credit management environment. Finance Division (FD) Bank's Finance Division is working towards achieving high standards as befitting for a financial institution like AB and is also embedded with compliance framework and policies of the Bank as a whole. Finance Division is about developing and maintaining a serviceoriented culture, having a strong capacity for strategic and tactical analysis, monitoring internal and outward factors and working within the businesses to add values. It is performing the key roles of controllership, budgeting, forecasting, financial analysis, business performance monitoring, decision making support, procurement (Payment Cell), ensure the regulatory compliances and is also providing risk management/ assessment framework support platform. Risk Management Division (RMD) RMD is constantly contemplating and exerting efforts for developing a structure and processes to ensure sound risk management in all areas of the Bank. Bank also formed a Supervisory Review Process (SRP) Team in pursuance of relevant guidelines of Bangladesh Bank. The function of SRP Team includes assessment/review of minimum capital requirement (MCR) and maintaining thereof as well as assessment of requirement of adequate capital in consideration of residual risk, evaluation of core risk management, credit concentration risk, interest rate risk, liquidity risk, Operation risk including reputation risk, settlement risk, strategic risk among others. Financial Performance in 2013 As one of the most highly regulated banking industries in the world, investors have some level of assurance in the soundness of the banking system. As a result, investors can focus most of their efforts on how a bank will perform in different economic environments. Sound financial health of a bank is the guarantee not only to its depositors but is equally significant for the shareholders, employees and whole economy as well. As a sequel to this maxim, efforts have been made from time to time, to measure the financial position of each bank and manage it efficiently and effectively. Amid a challenging economic and business environment, which prevailed throughout 2013, financial results of the Bank helped AB in achieving its desired path. In this year, business and functional strategies and activities were successfully driven towards the achievements. At the year end 2013, Total Assets of the Bank stood at BDT 20,801 crore (growth of 20 percent) while Total Capital reached at the level of BDT 1,877 crore which indicate the maximum level of wealth of the Bank. Loans and Advances reached BDT 14,012 crore while Deposits was BDT 16,185 crore representing growth of 32 percent and 16 percent respectively. Trading business also experienced good results in 2013 amply showing the efforts of the Bank in this respect. Annual Report

88 Directors Report 2013 Business Results: in Crore % Change Deposits 16,185 14, % Loans and Advances 14,012 10, % Investments 2,868 2, % Import Business 12,538 10, % Export Business 7,257 6, % Guarantee Business 1,899 1, % Remittance (USD) % Operating Profit % Net Operating Profit % Profit after Tax % Earnings per Share (BDT) % Return on Equity (%) 6.13% 9.31% 3.18% Return on Assets (%) 0.53% 0.88% 0.35% Asset Utilization Ratio (%) 84.60% 82.93% 1.67% Operating Profit of the Bank was BDT 529 crore registering a growth of 21 percent. Net Interest Income growth of 21 percent and nearly 23 percent growth in commission, exchange & brokerage income during the year led to the Operating Profit. Operational Performance BDT in Crore % Change Interest income 1,795 1, % Interest expenses 1,417 1, % Net interest income % Investment income % Comm.exchange & brokerage % Other income % Operating Revenue % Operating expenses % Profit before Provision & Tax % Provision & Tax % Profit after Tax % After providing for requisite Tax and Provisions as per Bangladesh Bank guidelines, Profit after Tax (PAT) stood at BDT 101 crore for the year. During the year, Bank also provided for BDT 197 crore as provision for Current and Deferred Tax. Interest income grew by 14 percent during 2013 which is consistent with the increase of Loans and Advances of 32 percent during the year. Bank had to mobilize funds to finance the growth of business. Deposits experienced a growth of 16 percent also resulting in increase of interest expense by 13 percent. Net interest income of the Bank was BDT 378 crore and was also having a growth of 21 percent, a testimony of Banks ability to maintain reasonable yield on Loans and Advances. Total Nonfunded or Noninterest Income including Income from Investments stood at BDT 598 crore at the end of the year which compares with the last year level of BDT 531 crore. Operating expenses during the year increased by BDT 39 crore an increased of 10 percent over last year. Bank had to sustain the growth momentum through investment in infrastructure and human capital. Moreover, inflationary effects and increase of business inputs including utilities contributed towards this upward move. Salary and allowances which accounts for 47 percent of Operating expenses increased by 11 percent as the Bank went for promotion and salary increment. Besides, rent, taxes, insurance, electricity also increased due to multiple reasons like imposition of VAT, expansion of new branch, etc. Communication and other expenses increased keeping pace with the increasing business volume. Depreciation and repair of Bank's assets showed upward trend due to charging of depreciation of newly procured assets. One of the key operational indicators "productivity of the employee" showed improvement in 2013: BDT in Crore Growth(%) Operating profit per employee % Net Profit after Tax per employee % Total Asset per employee % Profitability In Crore BDT Interest Income Vs Expenses In Crore BDT ,283 1,044 1,571 1,259 1,795 1,417 NonInterest Income In Crore BDT Operating Profit Profit after tax Interest Income Interest expense Annual Report

89 Directors Report 2013 Bank made progress in all major areas of business in Total Asset growth of 20 percent, Deposit growth of 16 percent, Loans and Advances growth of 32 percent, among others signifies a high performing Bank. BDT in Crore Growth(%) Total Assets 20,801 17, % Deposits 16,185 14, % Loans & Advances 14,012 10, % Investments 2,868 2, % Import 12,538 10, % Export 7,257 6, % Remittance (USD) % Guarantee 1,899 1, % Provision against Loans and Advances has increased during the year due to volume growth and also to cover the classified loans and advances. Bank gave constant emphasis on quality credit portfolio and could also keep the NPL Ratio at a manageable level due to the prudent risk management strategies. A committed recovery team and adequate monitoring and control systems are in place for asset quality assurance. Bank made total provisions of BDT 231 crore against Loans and Advances, OffBalance Sheet items, Investments and others. BDT in Crore Change% Net Profit after Tax % Total Income 2, , % Interest Income 1, , % Classified Loans % CL Ratio 3.37% 3.32% 1.43% CL Provisions % Total Assets of the Bank stood at BDT 20,801 crore in 2013 against BDT 17,384 crore in 2012 registering a growth 20 percent. Increases of total assets were mainly driven by business assets like Loans & Advances and Investments. Over a period of five years Bank's asset base has grown over 95 percent paving the way for shareholders value addition. BDT in Crore Growth(%) Cash 1, % Balance with other banks and % financial institutions Money at call and short notice % Investments 2, , % Loans and Advances 14, , % Fixed Assets % Other Assets 1, , % Total Assets 20, , % Loans and advances of the Bank grew by 32 percent and stood at BDT 14,012 crore during the year This is a result of continued growth in lending business and solid growth in banking activities reflecting a continued focus on customers and profitable growth. Commercial lending, the main concentration area for the Bank financing since long, comprises of 25 percent of total loans and advances. Sector wise loan portfolio also shows diversification mode of portfolio. Bank's investments, during the year 2013, were made mostly in government securities which stood at BDT 2,233 crore in 2013 as against BDT 1,974 crore in Out of total Investments 78 percent is in Government Securities to maintain SLR. Investment in Shares stood at BDT 584 crore at the yearend. Other Assets of the Bank stood at BDT 1,544 crore a growth of 1 percent during the year. Other assets mostly comprises investment in subsidiaries, advance tax, operational advances among others. Total liabilities in 2013 increased by 21 percent to BDT 19,107 crore from BDT 15,781 crore in 2012.Significant increases were in the area of Deposits. Borrowings increased by 174 percent to BDT 999 crore from BDT 365 crore in AB's total Deposit stood at BDT 16,185 crore at the end of year The volume of deposits, therefore, increased by 16 percent in 2013 over the previous year. The growth was supported by Branch network and along with management & Branch officeals hard effort. Total Assets In Crore BDT Industry Wise Loan Portfolio 2013 In Crore BDT Investment mix In Crore BDT 13 20, , ,299 10,691 15,269 Agriculture: 280 Large and medium scale industry: 3,011 Working capital: 28 Export: 133 Commercial lending: 3,503 Small and cottage industry: 6.3 Others: 6,994 Government Securities: 1,974 Shares & Bonds: 593 Others: 44 Annual Report

90 Directors Report 2013 Earnings per Share stood at BDT 2.03 in 2013 compared to BDT 2.89 last year. Return on Assets (ROA) for the year was 0.53 percent while Return on Equity (ROE) was 6.13 percent reflecting a testimony to a successful year for AB. Shareholders Equity stood at BDT 1,694 crore at the end of 2013 showing a growth of 6 percent over last year. Paidup Capital of the Bank went up by 12.5 percent to 498 crore representing the effect of Stock Dividend for the year Statutory Reserve stood at BDT 556 croreduring the year 20 percent reserve maintained on profit before tax for local operations and Mumbai branch has maintained statutory reserve for Reserve Bank of India (RBI) guidelines. Retained earnings for the year was BDT 499 crore from the last year level of BDT 516 crore. Cash flow statement During the year 2013, Bank had a net cash outflow of BDT 258 crore as given below: BDT in Crore Net cash flow from operating activities Net cash used in investment activities Net cash used in from financing activities Net increase and (decrease) in cash Net cash flow from operating activities Major component of net cash flow from operating activities was operating profit after elimination of the effect of depreciation and provision and non cash items in Profit and Loss Account. Increase in Loans and Advances and other cash flows from operating activities were covered from Deposits. Increase/(decrease) of current assets and current liabilities effect has given in operating activities. Net cash used in investment activities Net cash used in investment activities is negative as the Bank purchased government securities for SLR maintaining and fixed assets purchased for banking operation. Earnings Per Share BDT Net cash used in financing activities Net cash used in financing activities comprised long term borrowings and Dividend paid during the year. Capital Adequacy Bank maintained adequate capital throughout and at the end of the year CAR was percent. In 2013 the Bank's Core capital and Total Capital were 8.95 percent and percent respectively. Capital Adequacy Capital requirement 1, , Capital maintained 1, , Surplus/(Defecit) RWA 17, , CAR requirement 10% 10% CAR maintained 10.80% 11.73% Core Capital (TierI) includes PaidUp Capital, Statutory Reserve, General Reserve and Retained Earnings Supplementary Capital (TierII) comprises general provision on loans and advances including off balance sheet items, 50 percent of Revaluation Reserve of Securities and Assets. Capital Management Bank has a detailed capital plan in place developed in line with the annual Business Plan. Quarterly review of the Capital Plan is done by the Board. Bank also adjusts its capital plan as and when required judging on the business eventualities. Bank maintained adequate capital throughout. At the end of the year 2013, Capital Adequacy Ratio (CAR) stood at percent. Total Equity In Crore BDT Retained earnings Other reserve Statutory reserve Paidup capital Annual Report

91 Directors Report 2013 BDT in Crore % Growth Fully Paidup Capital % Statutory Reserve % General Reserve % Retained Earnings % a. Total Eligible TierI Capital 1, , % General Provision for Unclassified Loans % General Provision for off Balance Sheet Exposure % Assets Revaluation Reserves up to 50% % Revaluation Reserves of Securities ( Upto 50% ) % b. Total Eligible TierII Capital % c. Total Eligible Capital (a+b) 1, , % Total assets including OffBalance Sheet items 29, , % Total RiskWeighted Assets (RWA) 17, , % Total Required Capital (10% of Total RWA) 1, , % Capital Surplus / (Shortfall) % Capital Adequacy Ratio 10.80% 11.73% Quarterly CAR Position under BASEL II Capital Adequacy Ratio (Under BASEL II): BDT in Crore 2013 QTR I QTR II QTR III QTR IV Total Risk Weighted Assets (RWA) 15,236 16,443 16,924 17,387 Total Capital requirement 1,524 1,644 1,692 1,739 Capital Adequacy RatioRequirement 10% 10% 10% 10% Capital Adequacy RatioMaintained 11.32% 10.79% 10.59% 10.80% Total Capital maintained 1,724 1,774 1,793 1,877 Overall business performance indicators shows good position in terms of profitability, capital maintenance and Shareholders value addition for AB in LD Ratio (%) CL (%) 3.37% Capital Adequacy Ratio (%) Cost Income Ratio (%) Earning Per Share ()Diluted Return on Equity (%) Return on Assets (%) Asset Utilization Ratio (%) Consolidated Financial Statements As per the Bangladesh Securities & Exchange Rules, 1987 Rules 12 (2) The financial statements of an issuer of a listed security shall be prepared in accordance with requirements laid down in the Schedule and the International Accounting Standards as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB). In the year 2009, Bangladesh Bank guidelines on Basel II also laid emphasis on consolidation of accounts in case of Bank s housing any subsidiary company. Accordingly, Bank Management and the Board of Directors resolved to follow the guidelines of Bangladesh Financial Reporting Standards (BFRS) 10: Consolidated Financial Statements. In compliance with the aforesaid, AB Bank prepared Financial Statements on Consolidated basis and Solo basis. Consolidated Financial Statements consists of consolidation of: Consolidated Financial Statements for the Bank and its Subsidiaries were prepared and also separate Financial Statements were prepared for the Bank in relation to the year end 2013 accounts. The Financial Statements for the year 2012 have also been rearranged for better comparative information. Arab Bangladesh Bank Foundation (ABBF) ABBF a fully owned subsidiary of the Bank platform for philanthropic activities. Board of Directors of AB has resolved to dissolve Foundation in its present form and convert it into an entity under the Societies Act and to carry on with its philanthropic activities as envisioned. As ABBF operated only for philanthropic purpose and its profit is not distributable to the shareholders. Thus, for ensuring the fair presentation of the Financial Statements of the Parent Company (the Bank), the Financial Statements of ABBF has not been consolidated. The External Auditor of the Bank, ACNABIN Chartered Accountants has completed first year in office and as per directives issued by Bangladesh Bank; they are eligible for reappointment. So, the Shareholders of the Company will have to reappoint/appoint External Auditor for the year 2014 in the 32nd AGM of the Bank to be held on April 21, 2014 (Monday). Dividend Board of Director of the Bank has recommended Cash Dividend at 5 percent and Stock Dividend at 7 percent for the year ended 31st December, 2013 after keeping required provisions as envisaged by the applicable Acts and laws and regulations of Bangladesh Bank in this respect. ELECTION OF DIRECTORS In accordance with the relevant provisions of the Articles of Association of the Bank, at least one third of the Directors (other than the managing Director) shall retire in the next Annual General Meeting. All the retiring Directors are eligible for reelection/renomination by the 'respective group of shareholders under Articles 103 and 108 of the Articles of Association of the Bank. Annual Report

92 Directors Report 2013 BOARD OF DIRECTORS Board of Directors of AB comprises of 14 (fourteen) Members including the President & Managing Director. President & Managing Director is the ExOfficio Member of the Board. Runa Zakia Shahrood Khan, Mr. Shishir Ranjan Bose, FCA and Prof. Dr. M. Imtiaz Hossain have been inducted as Independent Directors in compliance with the guidelines of the Bangladesh Securities and Exchange Commission (BSEC). Board also has three Committees in operation viz Executive Committee, Audit Committee, Risk Management Committee. Respective Committees operate following their given TOR set by the Board of Bangladesh Bank as the case may be. President & Managing Director Mr. M. Fazlur Rahman was the President & Managing Director of the Bank upto January 02, After his resignation from the service w.e.f. January 02, 2014, Mr. Shamim Ahmed Chaudhury was the Managing Director as acting capacity upto February 22, Subsequently, Mr. Chaudhury has been appointed as the President and Managing Director of the Bank for the period of three years w.e.f February 23, Rating of was rated by Credit Rating Agency of Bangladesh Limited (CRAB). The summary of their ratings is given below: Surveillance Rating (2013) Credit Rating Agency of Bangladesh (CRAB) has affirmed AA3 rating in the long term and ST2 rating in the short term of AB Bank Limited for the year ended December 31, 2013 (based on Audited Financials). Commercial Banks rated AA3 in the long term belongs to Very strong capacity & very high quality cohort. Banks rated AA3 has very strong capacity to meet their financial commitments. AA3 rated banks are judged to be of high quality and are subject to low credit risk. Commercial Banks rated ST2 in the short term is considered to have strong capacity for timely repayment. Commercial Banks rated in this category are characterized with commendable position in terms of liquidity, internal fund generation, and access to alternative sources of funds. 32nd Annual General Meeting Long Term AA3 Date of Rating 27 March 2014 Validity Date 30 June 2015 Short Term ST2 The 32nd Annual General Meeting will be held on April 21, 2014 (Monday) at the Bashundhara Convention Centre2, Block C, Bashundhara R/A, Baridhara, Dhaka at 9.15 am. Future Outlook Looking ahead to H2 FY14 the balance of payments projections apprehends there will be a correction in the pace of export growth due to a possible slowdown in RMG sector orders, along with a pickup in imports as investor confidence grows. Although a global growth prospect for 2014 (3.6%) is higher than the previous two years, the road to recovery in the advanced economies is projected to remain uneven. A slightly positive remittance growth in H2 FY14 is also projected. The monetary stance in H2 FY14 takes the recent economic and financial sector developments into account and will target a monetary growth path which aims to bring average inflation down to 7 percent, while ensuring that credit growth is sufficient to stimulate inclusive economic growth. This would require a monetary program framework that limits reserve money growth to 16.2 percent and broad money growth to 17 percent by June The ceiling for private sector credit growth of 16.5 percent has been kept well in line with economic growth targets. The slightly higher credit to public sector for June 2014 is targeted. Financial institutions will be needed to play a concerted and proactive role in the development of the country and sustainability, increase financial inclusion of a large population now totally outside the banking umbrella. Infrastructure, investment policy clarity, political harmony, availability of power and gas at a sustainability level including absence of major natural calamity including containment of inflation remain causes of concern of the nation will be a difficult year for those financial institutions in Bangladesh which are not well organized and have serious lack of good governance. Banks with good and manageable portfolio will be able to harvest the result of an uptrend of Asian economy. Hence consolidating the growth and thereby remain compliant in all respects and yet earn respectable returns for all our shareholders will be our endeavor. Gratitude The Members of the board take this opportunity to express their gratitude to all the valued Shareholders, Clients, Patrons and Wellwishers for their continued support over the years. We are also deeply indebted to the Government of Bangladesh in particular to the Bangladesh Bank, Bangladesh Securities and Exchange Commission (BSEC), Stock Exchanges, other financial institutions, office of the Registrar of Joint Stock Companies & Firms and all other concerned for their continued guidance and support throughout this long journey of the bank. The Board would like to place on record their deepest appreciation for the dedicated services rendered by all the employees of the bank. AB will remain committed to its vision and also towards creation of Shareholder value. Besides, AB will also continue its holistic efforts in accelerating its contribution towards economic development of the country. Chairman Annual Report

93 President & Managing Director and CFO's Statement March 12, 2014 TO THE BOARD OF DIRECTORS Head Office, Dhaka SUB: CEO AND CFO s DECLERATION TO THE BOARD OF DIRECTORS OF THE BANK In compliance with the notification of Bangladesh Securities and Exchange Commission No. SEC/ CMRRCD/ /134/Admin/44 dated August 07, 2012; we declare the following for the financial year ended 31 December, 2013: i. We have reviewed the financial statements for the year and that to the best of our Knowledge and belief: a) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; b) these statements together present a true and fair view of the company s affairs and are in compliance with existing accounting standards and applicable laws; ii. There are, to the best of knowledge and belief, no transaction was entered into by the Bank during the year which are fraudulent, illegal or violation of the Bank s code of Conduct. This is placed for kind perusal of the Board. Mahadev Sarker FCA Chief Financial Officer Shamim A. Chaudhury President & Managing Director Annual Report

94 AUDITORS REPORT & FINANCIAL STATEMENTS [For The Year Ended 31 December 2013]

95 Independent Auditor s Report To the Shareholders Report on the Financial Statements We have audited the accompanying consolidated financial statements of and its subsidiaries ( the Group ) as well as the separate financial statements of ( the Bank ), which comprise the consolidated balance sheet and the separate balance sheet as at 31 December 2013 and the consolidated and separate Profit & Loss Accounts, consolidated and separate Statements of Changes in Equity and consolidated and separate Cash Flow Statements for the year then ended and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements and Internal Controls Management is responsible for the preparation of consolidated financial statements of the Group and also separate financial statements of the Bank that give a true and fair view in accordance with Bangladesh Financial Reporting Standards as explained in note # 1.13 and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements of the Group and also separate financial statements of the Bank that are free from material misstatement, whether due to fraud or error. The Bank Company (Amendment) Act, 2013 and the Bangladesh Bank Regulations require the Management to ensure effective internal audit, internal control and risk management functions of the Bank. The Management is also required to make a selfassessment on the effectiveness of antifraud internal controls and report to Bangladesh Bank on instances of fraud and forgeries. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements of the Group and the separate financial statements of the Bank based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements of the Group and separate financial statements of the Bank are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements of the Group and separate financial statements of the Bank. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements of the Group and separate financial statements of the Bank, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of consolidated financial statements of the Group and separate financial statements of the Bank that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements of the Group and also separate financial statements of the Bank. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and also separate financial statements of the Bank give a true and fair view of the consolidated financial position of the Group and the separate financial position of the Bank as at 31 December 2013, and of its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with Bangladesh Financial Reporting Standards as explained in note # Annual Report

96 Report on Other Legal and Regulatory Requirements In accordance with the Companies Act 1994, Securities and Exchange Rules 1987, the Bank Company (Amendment) Act, 2013 and the rules and regulations issued by Bangladesh Bank, we also report the following: (a) (b) we have obtained all the information and explanation which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; to the extent noted during the course of our audit work performed on the basis stated under the Auditor s Responsibility section in forming the above opinion on the consolidated financial statements of the Group and the separate financial statements of the Bank and considering the reports of the Management to Bangladesh Bank on antifraud internal controls and instances of fraud and forgeries as stated under the Management s Responsibility for the Financial Statements and Internal Control: i) internal audit, internal control and risk management arrangements of the Group and the Bank as disclosed in note # 1.15 to the financial statements appeared to be materially adequate; ii) nothing has come to our attention regarding material instances of forgery or irregularity or administrative error and exception or anything detrimental committed by employees of the Bank and its related entities; (c) (d) (e) (f) (g) (h) (i) (j) (k) financial statements of the subsidiaries of the Bank have been audited by other auditors except Cashlink Bangladesh Limited which has been audited by us and have been properly reflected in the consolidated financial statements; in our opinion, proper books of account as required by law have been kept by the Group and the Bank so far as it appeared from our examination of those books; the consolidated balance sheet and consolidated profit and loss account of the Group and the separate balance sheet and separate profit and loss account of the Bank dealt with by the report are in agreement with the books of account; the expenditure incurred was for the purposes of the Bank s business; the consolidated financial statements of the Group and the separate financial statements of the Bank have been drawn up in conformity with prevailing rules, regulations and accounting standards as well as with related guidance issued by Bangladesh Bank; adequate provisions have been made for advances which are, in our opinion, doubtful of recovery; the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements; the information and explanation required by us have been received and found satisfactory; and we have reviewed over 80% of the risk weighted assets of the Bank and we have spent around 3,950 person hours for the audit of the books and accounts of the Bank. Dated, 12 March 2014 ACNABIN Chartered Accountants Annual Report

97 & Its Subsidiaries Consolidated Balance Sheet At 31 December 2013 PROPERTY AND ASSETS Notes Cash 3(a) 11,362,379,912 9,622,886,412 In hand (including foreign currencies) 3.1(a) 1,328,232,066 1,231,720,758 Balance with Bangladesh Bank and its agent bank(s) 3.2(a) 10,034,147,846 8,391,165,655 (including foreign currencies) Balance with other banks and financial institutions 4(a) 5,983,961,130 7,473,564,867 In Bangladesh 4.1(a) 4,746,243,512 5,621,794,561 Outside Bangladesh 4.2(a) 1,237,717,618 1,851,770,306 Money at call and on short notice 5(a) 991,387,500 3,671,790,000 Investments 6(a) 29,617,297,504 26,949,597,279 Government 6.1(a) 22,327,865,346 19,743,454,873 Others 6.2(a) 7,289,432,157 7,206,142,406 Loans, advances and lease/investments 147,128,880, ,662,985,699 Loans, cash credits, overdrafts, etc./investments 7(a) 144,545,643, ,311,725,962 Bills purchased and discounted 8(a) 2,583,236,805 2,351,259,736 Fixed assets including premises, furniture and fixtures 9(a) 4,741,796,955 4,868,649,902 Other assets 10(a) 9,923,067,613 9,267,837,853 Nonbanking assets Total Assets 209,748,770, ,517,312,012 LIABILITIES AND CAPITAL Liabilities Borrowings from other banks, financial institutions and agents 11(a) 10,391,319,243 4,116,982,161 Deposits and other accounts 12(a) 161,609,892, ,908,043,708 Current account and other accounts 15,746,417,142 13,487,221,464 Bills payable 1,140,175,156 1,467,147,011 Savings bank deposits 17,093,460,022 14,860,539,427 Fixed deposits 91,742,137,914 80,452,713,916 Other deposits 35,887,701,999 29,640,421,890 Other liabilities 13(a) 20,454,511,793 15,290,014,994 Total liabilities 192,455,723, ,315,040,863 Capital/shareholders' equity Equity attributable to equity holders of the parent company 17,308,687,827 16,222,502,086 Paidup capital 14 4,976,253,760 4,423,336,680 Statutory reserve 15 5,564,799,391 5,005,314,801 Other reserve 16(a) 1,596,508,461 1,532,116,076 Retained earnings 17(a) 5,171,126,214 5,261,734,530 Minority interest 17(b) (15,640,425) (20,230,938) Total Equity 17,293,047,402 16,202,271,149 Total Liabilities and Shareholders' Equity 209,748,770, ,517,312,012 Annual Report

98 & Its Subsidiaries Consolidated Balance Sheet At 31 December 2013 OffBalance Sheet Items Notes Contingent liabilities 18 83,216,543,057 59,590,452,646 Acceptances and endorsements 26,948,988,710 19,642,751,282 Letters of guarantee ,393,076,675 12,882,332,805 Irrevocable letters of credit 30,225,132,651 17,863,397,969 Bills for collection 9,649,345,020 9,201,970,590 Other contingent liabilities Other commitments Documentary credits and short term traderelated transactions Forward assets purchased and forward deposits placed Undrawn note issuance and revolving underwriting facilities Undrawn formal standby facilities, credit lines and other commitments Total 83,216,543,057 59,590,452,646 The annexed notes form an integral part of these financial statements. Shamim Ahmed Chaudhury Managing Director Shishir Ranjan Bose, FCA Director Salim Ahmed Vice Chairman M. Wahidul Haque Chairman This is the consolidated balance sheet referred to in our separate report of even date. Dated, 12 March 2014 ACNABIN Chartered Accountants Annual Report

99 & Its Subsidiaries Consolidated Profit and Loss Account For the year ended 31 December 2013 Notes OPERATING INCOME Interest income/profit on investments Interest/profit paid on deposits and borrowings, etc. Net interest income Investment income Commission, exchange and brokerage Other operating income Total operating income (a) OPERATING EXPENSES Salary and allowances Rent, taxes, insurance, electricity, etc. Legal expenses Postage, stamps, telecommunication, etc. Stationery, printing, advertisement, etc. Chief executive's salary and fees Directors' fees Auditors' fees Depreciation and repairs of Bank's assets Other expenses Total operating expenses (b) Profit before provision (c = (ab)) Provision against loans and advances Provision for diminution in value of investments Other provisions Total provision (d) Profit before tax (cd) Provision for taxation Current tax Deferred tax Net profit after tax Appropriations Statutory reserve General reserve Dividends, etc. Retained surplus Minority interest Net Profit attributable to the shareholders of parent company Consolidated Earnings Per Share (EPS) 20(a) 21(a) 22(a) 23(a) 24(a) 25(a) 26(a) 27(a) 28(a) 29(a) 30(a) 31(a) 32(a) 33(a) 34(a) 35(a) 36(a) 38(a) 18,365,001,635 (14,281,076,850) 4,083,924,785 2,715,057,334 3,159,603, ,206,015 6,037,866,580 10,121,791,365 2,146,756, ,603,988 14,043, ,462, ,314,652 11,434,501 3,058,243 3,404, ,702, ,027,569 4,576,809,158 5,544,982,207 1,667,125, ,446, ,149,814 2,371,720,941 3,173,261,266 2,074,819,159 2,065,632,307 9,186,852 1,098,442, ,478, ,478, ,964,101 4,744, ,219, ,497,564,598 (12,686,931,403) 3,810,633,196 2,326,182,892 2,689,955, ,675,408 5,207,813,333 9,018,446,529 1,951,187, ,860,032 11,086, ,166, ,109,048 8,683,734 3,189,207 6,031, ,884, ,874,312 4,299,072,880 4,719,373, ,182, ,565,410 84,356,875 1,223,104,427 3,496,269,222 2,034,460,196 1,975,206,567 59,253,629 1,461,809, ,066, ,066, ,742,534 (5,141,410) 842,883, The annexed notes form an integral part of these financial statements. Shamim Ahmed Chaudhury Managing Director Shishir Ranjan Bose, FCA Director Salim Ahmed Vice Chairman M. Wahidul Haque Chairman This is the consolidated profit & loss account referred to in our separate report of even date. Dated, 12 March 2014 ACNABIN Chartered Accountants Annual Report

100 & Its Subsidiaries Consolidated Cash Flow Statement For the year ended 31 December Cash Flows from Operating Activities Interest receipts Interest payments Dividend receipts Fee and commission receipts Recoveries on loans previously written off Payments to employees Payments to suppliers Income taxes paid Receipts from other operating activities Payments for other operating activities Operating profit before changes in operating assets & liabilities Increase/decrease in operating assets and liabilities Loans and advances to customers Other assets Deposits from other banks Deposits from customers Trading liabilities (shortterm borrowings) Other liabilities Net cash flow from operating activities (a) Cash Flows from Investing Activities Purchase of government securities Purchase of trading securities, shares, bonds, etc. Purchase of property, plant and equipment Net cash used in investing activities (b) Cash Flows from Financing Activities Increase/(decrease) of longterm borrowings Dividend paid Net cash used in from financing activities (c) Net (decrease)/increase in cash (a+b+c) Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year (*) (*) Cash and cash equivalents: Cash Prize bonds Money at call and on short notice Balance with Bangladesh Bank and its agent bank(s) Balance with other banks and financial institutions Net Operating Cash Flow Per Share (NOCFPS) 17,868,906,709 (13,660,160,838) 92,382,323 2,302,351,297 4,151,397 (2,158,190,927) (166,314,652) (1,694,163,208) 3,638,981,563 (1,862,628,891) 4,365,314,773 (32,969,799,431) 1,045,630, ,235,941 20,479,696,573 6,278,478, ,482,081 (3,853,274,852) 512,039,921 (2,585,559,073) (83,289,752) (269,770,988) (2,938,619,813) (4,141,904) (939,542) (5,081,446) (2,431,661,338) 20,773,260,680 18,341,599,343 1,328,232,066 3,870, ,387,500 10,034,147,846 5,983,961,131 18,341,599, ,110,252,914 (12,084,816,416) 428,296,844 1,917,638,998 35,168,196 (1,959,870,850) (165,214,877) (1,255,457,669) 2,826,709,294 (1,780,622,074) 4,072,084,362 (10,805,534,596) (50,423,752) (1,518,308,927) 24,998,752,352 (6,611,565,014) (964,278,126) 5,048,641,936 9,120,726,298 (3,630,127,191) (835,644,329) (461,907,563) (4,927,679,083) 30,357,603 (178,010,131) (147,652,528) 4,045,394,687 16,727,865,994 20,773,260,680 1,231,720,759 5,019,400 3,671,790,000 8,391,165,655 7,473,564,867 20,773,260, Shamim Ahmed Chaudhury Managing Director Shishir Ranjan Bose, FCA Director Salim Ahmed Vice Chairman M. Wahidul Haque Chairman This is the consolidated cash flow statement referred to in our separate report of even date. Dated, 12 March 2014 ACNABIN Chartered Accountants Annual Report

101 & Its Subsidiaries Consolidated Statement of Changes in Equity For the year ended 31 December 2013 Paidup Particulars capital Statutory reserve General reserve Assets revaluation reserve Balance at 01 January ,423,336,680 5,005,314, ,093,432 1,326,815,807 Adjustment Dividend for 2012: 12.5% stock dividend 552,917,080 Minority interest Restated opening balance 4,976,253,760 5,005,314, ,093,432 1,326,815,807 Net profit after tax for the year Addition/(Adjustment) made during the year 584,653,545 Foreign exchange fluctuation (25,168,955) (2,075,002) Balance at 31 December ,976,253,760 5,564,799, ,018,430 1,326,815,807 Balance at 31 December ,423,336,680 5,005,314, ,093,432 1,326,815,807 This is the consolidated statement of changes in equity referred to in our separate report of even date. Foreign exchange revaluation reserve on investment in foreign operation Investment revaluation reserve 68,360,312 16,846,523 68,360,312 16,846,523 Shamim Ahmed Chaudhury Managing Director Shishir Ranjan Bose, FCA Director Dated, 12 March ,438,021 (62,324,709) (1,645,924) 6,035, ,638,620 68,360,312 16,846,523 Salim Ahmed Vice Chairman Minority interest (20,230,938) (20,230,938) 4,744,929 (154,417) (15,640,425) (20,230,938) Amounts in Retained earnings Total 5,261,734,530 16,202,271,147 (552,917,080) 4,708,817,450 16,202,271,147 1,093,697,177 1,098,442,107 (574,612,893) 140,324,257 (56,775,521) (147,990,110) 5,171,126,214 17,293,047,402 5,261,734,530 16,202,271,149 M. Wahidul Haque Chairman ACNABIN Chartered Accountants Annual Report

102 Balance Sheet At 31 December 2013 PROPERTY AND ASSETS Notes Cash 3 11,359,517,250 9,622,840,530 In hand (including foreign currencies) 3.1 1,325,369,404 1,231,674,876 Balance with Bangladesh Bank and its agent bank(s) ,034,147,846 8,391,165,655 (including foreign currencies) Balance with other banks and financial institutions 4 7,238,990,059 8,877,073,955 In Bangladesh 4,744,159,686 5,616,079,788 Outside Bangladesh 2,494,830,373 3,260,994,166 Money at call and on short notice 5 991,387,500 3,671,790,000 Investments 6 28,675,696,033 26,114,787,647 Government ,327,865,346 19,743,454,873 Others 6.2 6,347,830,687 6,371,332,773 Loans, advances and lease/investments 7 140,121,297, ,065,758,923 Loans, cash credits, overdrafts, etc./investments ,067,739, ,373,785,000 Bills purchased and discounted 8 1,053,558, ,973,923 Fixed assets including premises, furniture and fixtures 9 4,172,564,367 4,229,520,560 Other assets 10 15,446,091,023 15,260,656,171 Nonbanking assets Total Assets 208,005,543, ,842,427,785 LIABILITIES AND CAPITAL Liabilities Borrowings from other banks, financial institutions and agents 11 9,987,492,033 3,649,261,782 Deposits and other accounts ,846,275, ,025,953,891 Current accounts and other accounts 15,742,024,927 13,487,687,930 Bills payable 1,140,175,156 1,467,147,010 Savings bank deposits 17,093,460,022 14,860,539,427 Fixed deposits 91,742,137,914 80,452,713,916 Other deposits 36,128,477,296 29,757,865,608 Other liabilities 13 19,231,727,325 14,133,406,241 Total Liabilities 191,065,494, ,808,621,915 Capital/Shareholders' Equity Total Shareholders' Equity 16,940,049,066 16,033,805,870 Paidup capital 14 4,976,253,760 4,423,336,680 Statutory reserve 15 5,564,799,391 5,005,314,801 Other reserve 16 1,412,629,267 1,446,253,561 Retained earnings 17 4,986,366,647 5,158,900,828 Total Liabilities and Shareholders' Equity 208,005,543, ,842,427,785 Annual Report

103 Balance Sheet At 31 December 2013 OffBalance Sheet Items Notes Contingent liabilities 18 83,216,543,057 59,590,452,646 Acceptances and endorsements 26,948,988,710 19,642,751,282 Letters of guarantee ,393,076,675 12,882,332,805 Irrevocable letters of credit 30,225,132,651 17,863,397,969 Bills for collection 9,649,345,020 9,201,970,590 Other contingent liabilities Other commitments Documentary credits and short term traderelated transactions Forward assets purchased and forward deposits placed Undrawn note issuance and revolving underwriting facilities Undrawn formal standby facilities, credit lines and other commitments Total 83,216,543,057 59,590,452,646 The annexed notes form an integral part of these financial statements. Shamim Ahmed Chaudhury Managing Director Shishir Ranjan Bose, FCA Director Salim Ahmed Vice Chairman M. Wahidul Haque Chairman This is the balance sheet referred to in our separate report of even date. Dated, 12 March 2014 ACNABIN Chartered Accountants Annual Report

104 Profit and Loss Account For the year ended 31 December 2013 Notes OPERATING INCOME Interest income/profit on investments Interest paid/profit on deposits and borrowings, etc. Net interest income Investment income Commission, exchange and brokerage Other operating income Total operating income (a) ,953,048,673 (14,173,526,482) 3,779,522,191 2,841,538,159 3,020,517, ,557,511 5,975,613,644 9,755,135,835 15,714,006,609 (12,591,500,175) 3,122,506,434 2,714,131,615 2,461,270, ,035,990 5,312,438,455 8,434,944,888 OPERATING EXPENSES Salary and allowances Rent, taxes, insurance, electricity, etc. Legal expenses Postage, stamps, telecommunication, etc. Stationery, printing, advertisement, etc. Chief executive's salary and fees Directors' fees Auditors' fees Depreciation and repairs of Bank's assets Other expenses Total operating expenses (b) Profit before provision (c = (ab) Provision against loans and advances Provision for diminution in value of investments Other provisions Total provision (d) Profit before taxation (cd) Provision for taxation Current tax Deferred tax Net profit after taxation Appropriations Statutory reserve General reserve Dividends, etc. Retained surplus Earnings Per Share (EPS) ,081,594, ,485,269 13,260, ,468, ,680,619 11,434,501 2,513,743 2,455, ,298,293 1,006,285,515 4,465,477,486 5,289,658,349 1,667,125, ,900, ,000,000 2,305,025,000 2,984,633,350 1,973,636,035 1,976,443,810 (2,807,775) 1,010,997, ,478, ,478, ,519, ,868,144, ,531,774 10,107, ,329, ,413,748 8,683,734 2,840,207 4,917, ,640, ,307,326 4,071,916,777 4,363,028, ,182, ,400,000 84,160,000 1,172,742,142 3,190,285,969 1,751,748,156 1,708,291,302 43,456,854 1,438,537, ,066, ,066, ,471, The annexed notes form an integral part of these financial statements. Shamim Ahmed Chaudhury Managing Director Shishir Ranjan Bose, FCA Director Salim Ahmed Vice Chairman M. Wahidul Haque Chairman This is the profit & loss account referred to in our separate report of even date. Dated, 12 March 2014 ACNABIN Chartered Accountants Annual Report

105 Cash Flow Statement For the year ended 31 December 2013 Notes Cash Flows from Operating Activities Interest receipts Interest payments Dividend receipts Fee and commission receipts Recoveries on loans previously written off Payments to employees Payments to suppliers Income taxes paid Receipts from other operating activities Payments for other operating activities Operating profit before changes in operating assets & liabilities Increase/decrease in operating assets and liabilities Loans and advances to customers Other assets Deposits from other banks Deposits from customers Trading liabilities (shortterm borrowings) Other liabilities Net cash flow from operating activities (a) Cash Flows from Investing Activities Purchase of government securities Purchase of trading securities, shares, bonds, etc. Purchase of property, plant and equipment Net cash used in investing activities (b) Cash Flows from Financing Activities Increase/(decrease) of longterm borrowings Dividend paid Net cash used in from financing activities (c) Net (decrease)/increase in cash (a+b+c) Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year (*) (*) Cash and cash equivalents: Cash Prize bonds Money at call and on short notice Balance with Bangladesh Bank and its agent bank(s) Balance with other banks and financial institutions Net Operating Cash Flow Per Share (NOCFPS) ,456,953,748 (13,552,610,471) 203,264,167 2,157,327,618 4,151,397 (2,093,029,262) (164,680,619) (1,489,851,305) 3,610,870,462 (1,911,516,399) 4,220,879,335 (33,559,443,656) 1,202,074, ,235,941 20,598,169,472 6,342,372, ,322,731 (3,970,268,801) 250,610,534 (2,585,559,073) 23,502,086 (266,430,377) (2,828,487,364) (4,141,904) (939,542) (5,081,446) (2,582,958,276) 22,176,723,886 19,593,765,610 1,325,369,405 3,870, ,387,500 10,034,147,846 7,238,990,059 19,593,765, ,326,694,925 (11,989,385,188) 428,296,844 1,679,196,940 35,168,196 (1,876,828,285) (157,488,361) (1,548,936,383) 3,169,776,474 (1,721,791,885) 3,344,703,276 (11,040,228,876) 565,680,945 (1,518,308,927) 24,790,283,691 (6,629,285,393) (364,695,728) 5,803,445,713 9,148,148,989 (3,630,127,191) (928,911,197) (459,656,732) (5,018,695,120) 30,357,603 (178,010,131) (147,652,528) 3,981,801,341 18,194,922,545 22,176,723,886 1,231,674,876 5,019,400 3,671,790,000 8,391,165,655 8,877,073,955 22,176,723, The annexed notes form an integral part of these financial statements. Shamim Ahmed Chaudhury Managing Director Shishir Ranjan Bose, FCA Director Salim Ahmed Vice Chairman M. Wahidul Haque Chairman This is the cash flow statement referred to in our separate report of even date. Dated, 12 March 2014 ACNABIN Chartered Accountants Annual Report

106 Statement of Changes in Equity For the year ended 31 December 2013 Paidup Particulars capital Statutory reserve General reserve Balance at 01 January ,423,336,680 5,005,314,801 42,199,200 Adjustment Bonus for 2012: 12.5% Stock Dividend 552,917,080 Restated Opening Balance 4,976,253,760 5,005,314,801 42,199,200 Net profit after taxation for the year Addition/(Adjustment) made during the year 584,653,545 Foreign Exchange Rate Fluctuation (25,168,955) Balance at 31 December ,976,253,760 5,564,799,391 42,199,200 Balance at 31 December ,423,336,680 5,005,314,801 42,199,200 Shamim Ahmed Chaudhury Managing Director Shishir Ranjan Bose, FCA Director This is the statement of changes in equity referred to in our separate report of even date. Dated, 12 March 2014 Assets revaluation reserve 1,326,815,807 1,326,815,807 1,326,815,807 1,326,815,807 Foreign exchange revaluation reserve on investment in foreign operation 60,392,031 60,392,031 (60,392,031) 60,392,031 Salim Ahmed Vice Chairman Investment revaluation reserve 16,846,523 16,846,523 28,413,661 (1,645,924) 43,614,260 16,846,523 (Amounts in ) Retained earnings Total 5,158,900,828 16,033,805,870 (552,917,080) 4,605,983,748 16,033,805,870 1,010,997,314 1,010,997,314 (574,478,006) 38,589,201 (56,136,410) (143,343,319) 4,986,366,647 16,940,049,066 5,158,900,828 16,033,805,870 M. Wahidul Haque Chairman ACNABIN Chartered Accountants Annual Report

107 Liquidity Statement Analysis of Maturity of Assets and Liabilities At 31 December 2013 Up to 1 month's Particulars maturity Assets Cash in hand & with banks Balance with other banks and financial institutions Money at Call & Short Notice Investments Loans & advances Fixed assets including premises, furniture and fixture Other assets Nonbanking assets Total Assets 2,418,317,250 3,119,318, ,287, ,956,791 23,278,479,950 3,610,143,936 33,673,503,987 Liabilities Borrowing from Bangladesh Bank, other banks, financial institutions and agents Deposit and other accounts Provision and other Liabilities Total Liabilities Net Liquidity Excess/(shortage) 3,903,120,310 24,054,649, ,010,694 28,395,780,300 5,277,723,687 This is the liquidity statement referred to in our separate report of even date. 13 months' maturity 1,119,450, ,000, ,809,554 33,844,889,706 3,146,999,760 39,554,149,270 Shamim Ahmed Chaudhury Managing Director Shishir Ranjan Bose, FCA Director Dated, 12 March ,147,870,040 34,788,853, ,045,814 39,055,769, ,379, months' maturity 15 years' maturity 3,000,221,250 25,100,000 6,004,105,500 56,676,768,431 2,702,005,953 68,408,201,133 6,582,170,904 22,858,233,012 29,440,403,916 1,878,041,325 67,362,500,417 4,537,567,328 73,778,109,069 (5,369,907,935) 58,460,358 34,252,352,458 14,137,103,490 48,447,916,306 (19,007,512,390) Salim Ahmed Vice Chairman Amount in More than 5 years' maturity Total 8,941,200,000 14,365,653,285 3,462,926,405 4,172,564,367 5,986,941,374 36,929,285,431 11,359,517,250 7,238,990, ,387,500 28,675,696, ,121,297,505 4,172,564,367 15,446,091, ,005,543,738 1,387,919,580 1,387,919,580 35,541,365,851 9,987,492, ,846,275,314 19,231,727, ,065,494,672 16,940,049,066 M. Wahidul Haque Chairman ACNABIN Chartered Accountants Annual Report

108 Notes to financial statements For the year ended 31 December The Bank and its activities (the Bank) is one of the first generation Private Commercial Banks (PCBs) incorporated in Bangladesh on 31 December 1981 as a public limited company under the Companies Act 1913, subsequently replaced by the Companies Act 1994, and is governed by the Bank Company (Amendment) Act The Bank went for public issue of its shares on 28 December 1983 and its shares are listed with Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. has 89 Branches including one (1) Islami Banking Branch and one (1) Overseas Branch in Mumbai, India. The Bank has six subsidiary companies namely AB Investment Limited, AB Securities Limited, Cashlink Bangladesh Limited, Arab Bangladesh Bank Foundation all incorporated in Bangladesh, AB International Finance Limited, incorporated in Hong Kong and AB Exchange (UK) Limited, incorporated in United Kingdom. AB Investment Limited (ABIL) and AB Securities Limited (ABSL) were incorporated as subsidiary companies after obtaining the approvals from Bangladesh Bank following guidelines of the Bangladesh Securities and Exchange Commission (BSEC). These two subsidiaries are being put into operations to cater the merchant banking and brokerage business which were previously carried out by the Bank itself. The Bank through its Branches and nonbanking subsidiaries provides a diverse range of financial services and products in Bangladesh and in certain international markets. The Bank has expanded its capital market oriented service horizon to its customers through AB Investment Limited. The Bank obtained permission from BSEC to embark upon merchant banking vide its certificate no. MB1.02/ dated 15 May 2001 under the Securities and Exchange Commission Act Subsequently, the Bank has formed a subsidiary company named AB Investment Limited in accordance with the approval of Bangladesh Bank vide letter no. BRPD(R1)717/ dated 09 December 2009 and the Bangladesh Securities and Exchange Commission vide letter no. Sec/Reg/MB79/2010/73 dated 10 March 2010 for dealing the Merchant Banking business. Brokerage business of Arab Bangladesh Bank Foundation (ABBF) was transferred on 01 August 2010 to AB Securities Limited (ABSL) vide Bangladesh Bank approval letter BRPD(R1)717/ dated 08 November started its Islami Banking operation through its Dilkusha Islami Banking Branch, Dhaka on 23 December 2004 following the permission of Bangladesh Bank vide letter no. BRPD (P) 745 (12)/ dated 08 July Subsequently the Branch was shifted to Kakrail, Dhaka on 18 October The Bank obtained permission to work as a security custodian from the Bangladesh Securities and Exchange Commission vide its certificate no. SC05/2007 dated 22 January 2007 under the Securities and Exchange Commission (Securities Custodian Service) Rules In the year 2009, the Bank obtained permission to operate Off Shore Banking Unit (OBU) vide letter # BRPD (P3)744/(106)/ dated 06 December 2009 of Bangladesh Bank. OBU operation has been carried out from 28 April 2010 through the Bank's EPZ Branch, Chittagong. The Bank has a dedicated philanthropic unit named Arab Bangladesh Bank Foundation (the Foundation) which has been operating since Foundation has obtained brokerage licenses from BSEC on 15 August 2006 and 23 October 2006 for Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) respectively and started its operation from 28 August 2006 and 05 December 2006 on DSE and CSE respectively. However, in view of the decision of Bangladesh Bank and upon due agreement to that effect the Board of Directors of ABBL and ABBF respectively, launched a new subsidiary company AB Securities Limited for the operation of brokerage business. The business of ABBF is now being conducted by AB Securities Limited. 1.2 Significant accounting policies and basis of preparation of the financial statements Presentation of the financial statements Consolidated financial statements and separate financial statements of the Bank comprise of Balance Sheet, Profit and Loss Account, Cash Flow Statement, Statement of Changes in Equity, Liquidity Statement and relevant notes and disclosures. Consolidated financial statements and financial statements of the Bank were made as at 31 December 2013 and were prepared under the historical cost convention except investments categorised under held for trading and in accordance with Bank Company (Amendment) Act 2013, BRPD circular no. 14 dated 25 June 2003, the Companies Act 1994, the Securities and Exchange Ordinance 1969, Securities and Exchange Rules 1987 and other laws and rules applicable for the Bank. Annual Report

109 Notes to financial statements For the year ended 31 December 2013 Consolidated financial statements and financial statements of the Bank have been prepared in accordance with the measurement and recognition requirements of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted by the Institute of Chartered Accountants of Bangladesh as Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS). Basis of consolidation Separate set of records for consolidating the financial statements of the Branches including Mumbai Branch, India, AB Investment Limited, AB Securities Limited, Cashlink Bangladesh Limited, AB International Finance Limited, Hong Kong and AB Exchange (UK) Limited are maintained at the Head Office of the Bank, based on which these financial statements have been prepared. The consolidated financial statements have been prepared in accordance with the BFRS 10 "Consolidated Financial Statements". The Consolidated Financial Statements have been prepared to a common reporting period ending on 31 December Mumbai Branch, India The assets and liabilities of Mumbai Branch, India have been incorporated in the accounts at year end exchange rate. Income and expenditures have been incorporated in the accounts by each line item. The Balance Sheet and Profit and Loss Account of the Mumbai Branch have been shown separately in AnnexF. Islami Banking Branch Islami Banking Branch has been maintaining separate set of books and records for its operations following Bangladesh Bank guidelines. All assetsliabilities and incomeexpenses of this Branch have been incorporated in similar heads of account of the Bank's financial statements. Balance Sheet and Profit and Loss Account of Islami Banking Branch is shown separately in AnnexG as per Bangladesh Bank BRPD Circular No. 15 dated 09 November Distribution of profit under Islamic Banking Operation and fixation of final rate for the year 2013 has also been disclosed separately in AnnexH. Custodian Wing Financial statements of Custodian Wing have been separately audited by the auditors of the Bank. Incomeexpenditures of Custodian Wing have been incorporated in similar heads of account of the Bank's Profit and Loss Account. Profit and Loss Account of Custodian Wing has been shown separately in AnnexI. OffShore Banking Unit (OBU) This particular unit of the Bank started its operation in the year Assetsliabilities and incomeexpenditures of Off Shore Banking Unit are incorporated in similar heads of account of the Bank's Balance Sheet and Profit and Loss Account. The Balance Sheet and Profit and Loss Account of the Off Shore Banking Unit (OBU) have been shown separately in AnnexJ. Subsidiaries Operation The financial statements of subsidiaries (except Arab Bangladesh Bank FoundationABBF) have been consolidated following BFRS 10 "Consolidated Financial Statements". ABBF operated only for philanthropic purpose and its profit is not distributable to the shareholders. Thus, for ensuring the fair presentation of the Financial Statements of the Parent Company (the Bank), the Financial Statements of ABBF has not been consolidated. AB Investment Limited (ABIL) AB Investment Limited (ABIL) started its operation from 10 March 2010 for Merchant Banking Operation. holds 99.99% shares in ABIL. The Balance Sheet and Profit and Loss Account of the ABIL have been shown separately in AnnexK. AB Securities Limited (ABSL) Brokerage business of Arab Bangladesh Bank Foundation has been transferred to AB Securities Limited (ABSL) vide Bangladesh Bank approval letter BRPD(R1)717/ dated 08 November at present holds 99.71% shares in ABSL. The Balance Sheet and Profit and Loss Account of the ABSL have been shown separately in AnnexL. CashLink Bangladesh Limited (CBL) Cashlink Bangladesh Limited (CBL) was incorporated on 24 September 2008 with an authorised capital of 1,000,000,000 divided into 100,000,000 ordinary shares of 10 each. The Bank at present holds 90% shares in CBL. The Balance Sheet and Profit and Loss Account of the CBL have been shown separately in AnnexM. AB International Finance Limited (ABIFL) AB International Finance Limited (ABIFL) is a company incorporated in Hong Kong. Its registered office and principal place of Annual Report

110 Notes to financial statements For the year ended 31 December 2013 business is situated at Unit 1201B, 12/F, Admiralty Centre, Tower One, 18 Harcourt, Hong Kong. It is a fully owned (100%) Subsidiary of. The Balance Sheet and Profit and Loss Account of the ABIFL have been shown separately in AnnexN. AB Exchange (UK) Limited AB Exchange (UK) Limited (ABEL) is a company incorporated and domiciled in United Kingdom (UK) vide registration no (England & Wales). The registered office is situated at 69 Whitechapel High Street, London, E1 7PL. ABEL is a fully owned (100%) Subsidiary of. The Balance Sheet and Profit and Loss Account of the ABEL have been shown separately in AnnexO. Arab Bangladesh Bank Foundation (ABBF) Arab Bangladesh Bank Foundation (ABBF) has maintained separate set of books and records for its operation. The Balance Sheet and Profit and Loss Account of the ABBF have been shown separately in AnnexP. Use of estimates and judgments The preparation of consolidated financial statements and financial statements of the Bank required management to make judgments, estimates and assumptions that affected the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions have been reviewed considering business realities. Revisions of accounting estimates have been recognised in the period in which the estimates have been revised and in the future periods affected, if applicable. All intergroup balances, transactions, income and expenses are fully eliminated while preparing the consolidated financial statements. Materiality, aggregation and offsetting The Bank aggregates each material class of similar items and separately which are dissimilar in nature or function unless those are immaterial. The Bank did not offset assets and liabilities or income and expense, unless required or permitted by BAS/ BFRS. Foreign currency transactions Functional and presentational currency Financial statements of the Bank have been presented in, which is the Bank s functional and presentational currency. Foreign currency translation Foreign currency transactions have been converted into equivalent currency at the ruling exchange rates on the respective date of such transactions as per BAS 21 The Effects of Changes in Foreign Exchange Rates. Assets and liabilities in foreign currencies as at 31 December 2013 have been converted into currency at the average of the prevailing buying and selling rates of the relevant foreign currencies at that date except "balances with other banks and financial institutions" which have been converted as per directives of Bangladesh Bank vide its circular no. BRPD (R) 717/ dated 21 November Differences arising through buying and selling transactions of foreign currencies on different dates of the year have been adjusted by debiting/crediting exchange gain or loss account. Commitment Commitments for outstanding forward foreign exchange contracts disclosed in the consolidated financial statements and financial statements of the Bank have been translated at contracted rates. Contingent liabilities/commitments for letter of credit, letter of guarantee and acceptance denominated in foreign currencies have been expressed in terms at the rates of exchange ruling on the balance sheet date. Translation gain and losses Gains or losses arising out of translation of foreign exchange have been included in the Profit and Loss Account, except those arising on the translation of net investment in foreign branch and subsidiaries. Annual Report

111 Notes to financial statements For the year ended 31 December 2013 Foreign operations The results of financial statements of the Bank whose functional currency is not Bangladesh are translated into Bangladesh as follows: a. assets and liabilities for each items of Balance Sheet have been translated at the closing rate on the date of Balance sheet. b. income and expenses for Profit and Loss Account have been translated at an monthly average rate of the year; and c. all resulting exchange differences have been recognized in the P&L or as a separate components of equity, where appropriate. Cash flow statement Cash Flow Statement is prepared principally in accordance with BAS 7 Statement of Cash Flows under direct method as per the guidelines of BRPD circular no. 14 dated 25 June The Statement of Cash Flows show the structure of and changes in cash and cash equivalents during the year. Cash Flows during the period have been classified as operating activities, investing activities and financing activities. Statement of changes in equity Statement of Changes in Equity has been prepared in accordance with BAS 1 Presentation of Financial Statements and following the guidelines of Bangladesh Bank BRPD circular no.14 dated 25 June Liquidity statement The basis of the liquidity statement of assets and liabilities as on the reporting date is given below: Particulars Basis used Balance with other banks and financial institutions Maturity term Investments Respective maturity terms Loans and advances Repayment schedule basis Fixed assets Useful life Other assets Realization/ amortization basis Borrowing from other banks, financial institutions and agents Maturity/ repayments terms Deposits and others accounts Maturity term/ Previous trend Other liabilities Payments/ adjustments schedule basis 1.3 Assets and basis of their valuation Cash and cash equivalents Cash comprises cash in hand and demand deposits in the banks. Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Loans and advances i. Loans and advances/investments in Islamic Banking Branch are stated at gross amounts at 31 December ii. Interest/profit is calculated on a daily product basis but charged and accounted for on accrual basis. Interest/profit on classified loans and advances/ investment is kept in suspense account as per Bangladesh Bank instructions and such interest/profit is not accounted for as income until realized from borrowers. Interest/profit is not charged on bad and loss loans/investments as per guideline of Bangladesh Bank. iii. Commission and discounts on bills purchased and discounted are recognised at the time of realisation. iv. Provision for loans and advances is made on the basis of quarterend review by the management and as per instructions contained in BRPD circular no. 14 dated 23 September 2012, BRPD circular no. 19 dated 27 December 2012 and BRPD circular no. 05 dated 29 May The rates for provisions are stated below: General Provision Specific Provision Types of loans and advances House building and professionals to setup business Consumer Other than housing finance & professionals to setup business Loan to brokerage house, merchant banks, stock dealers Shortterm agricredit and micro credit Small and medium enterprise finance Other advances Offbalance sheet items UC 2% 5% 2% 5% 0.25% 1% 1% SMA 2% 5% 2% 0.25% 1% SS 20% 20% 20% 5% 20% 20% DF 50% 50% 50% 5% 50% 50% BL 100% 100% 100% 100% 100% 100% Annual Report

112 Notes to financial statements For the year ended 31 December 2013 Investment Investments have been initially recognised at cost, including acquisition charges associated with the investment. Premium have been amortised and discount accredited, using the effective or historical yield method. Government Treasury Bills and Bonds (categorized as HFT or/and HTM) are accounted for as per Bangladesh Bank DOS circular letter no. 05 dated 26 May 2008 and DOS circular no. 05 dated 28 January The valuation methods of investment used are: Government securities Held to Maturity (HTM) Investments which are intended to be held to maturity are classified as Held to Maturity. These are measured at amortised cost at each year end by taking into account any discount or premium in acquisition. Amortised amount of such premium are booked into Profit and Loss Account or discount is booked to reserve until maturity/disposal. Held for Trading (HFT) Investment primarily held for selling or trading is classified in this category. After initial recognition, investments are mark to market weekly. Decrease in the book value is recognised in the Profit and Loss Account and any increase is transferred to revaluation reserve account. Value of investments has been enumerated as follows: Investment class Treasury Bill/Bond (HFT) Treasury Bill/Bond (HTM) Debenture Prize bond Shares Initial recognition Cost Cost Face value Cost Cost Measurement after initial recognition Market value Amortised value None None Lower of cost and market value These securities are brought and held primarily for the purpose of selling them in future or held for dividend income. These are reported at cost. Unrealised gains are not recognised in the Profit and Loss Account as per BAS 18 "Revenue". In Accordance with BRPD Circular no. 14 dated 25 June 2003, provisions should be made for any loss arising from the diminution in value of investments. Subsequently as per DOS Circular No.04 dated 24 November 2011, provisions may be made for any loss arising from the diminution in value of investments after netting of gain. Investment in unlisted securities Investment in unlisted securities is reported at cost under cost method. Investment in subsidiaries Investment in subsidiaries is accounted for under the cost method of accounting in the Bank s financial statements in accordance with the BAS 27 "Separate Financial Statements". Fixed assets i. All fixed assets are stated at cost less accumulated depreciation as per BAS 16 "Property, Plant and Equipment". The cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognized in accordance with the specific requirements of the BFRS. ii. The cost of an item of property, plant and equipment is recognized as an asset if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. iii. Depreciation on fixed assets is charged using reducing balance method except motor vehicles, computers & computer equipments and photocopiers for which straightline method is used. The rates of depreciation are as follows: Category of asset Rate of depreciation Land Nil Building 2.5% Furniture and fixtures 10% Electrical appliances 20% Motor vehicles 20% Leasehold assetsvehicles 20% Recording of changes Loss to profit and loss account (P&L), gain to revaluation reserve Increase in value to equity and decrease in value to P&L None None Any loss, charged in P&L Unrealized gain, not recognize in accounts Annual Report

113 Notes to financial statements For the year ended 31 December 2013 iv. Depreciation on fixed assets acquired during the year is charged from the month of their acquisition. Full month's depreciation is charged in the month of addition irrespective of the date of acquisition and no depreciation is charged in the month of their disposal. v. The cost and accumulated depreciation of disposed assets are eliminated from the fixed assets schedule and gain or loss on such disposal is reflected in the Profit and Loss Account. vi. Useful lives and method of depreciation of fixed assets are reviewed periodically. If useful lives of assets do not differ significantly as these were previously estimated, revaluation of assets does not consider to be done. vii. Bank capitalised items value of which is over BDT 50,000 and the items below BDT 50,000 were booked as noncapitalized items under the broader head of other expenses with effect from 01 March 2009 in accordance with the relevant policy of the Bank. viii. Bank also follows a policy for amortisation of expenditure considering the durability and useful lives of items. These are treated as intangible assets and are booked under the head Fixed Assets and amortised over their estimated useful lives by charging under the broad head Depreciation. Intangible assets An intangible asset is recognized if: a. It is probable that the expected future economic benefits that are attributable to the assets will flow to the entity; and b. The cost of the assets can be measured reliably. Other assets Other assets include all balance sheet items not covered specifically in other areas. Leasing Where property, plant and equipment have been financed by lease arrangement under which substantially all the risks and rewards of ownership are transferred to the lessees are treated as finance leases as per BAS 17 "Leases". All other leases are classified as operating leases as per BAS 17 "Leases" Bank as lessee Assets held under finance lease are recognised as assets of the Bank at their fair value at the date of acquisition or if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Assets held under finance lease are depreciated over their expected useful lives on the same basis as owned assets. Bank as lessor The Bank did not grant any lease finance. Stock of stationery Stock of stationery has been shown under other assets and is valued at cost. 1.4 Capital, Reserve, Liabilities and Provision and Basis of their Valuation Share capital Ordinary shares are classified as equity when there is no contractual obligation to transfer cash or other financial assets. Statutory reserve As per Section 24 of the Bank Company (Amendment) Act 2013, 20% of current year s profit of the Bank is required to be transferred to Statutory Reserve until such reserve together with share premium account equals to its paid up capital. Revaluation reserve When an asset s carrying amount is increased as a result of revaluation, the increased amount should be credited directly to equity under the head revaluation surplus/ reserve as per BAS 16 "Property, Plant and Equipment". Annual Report

114 Notes to financial statements For the year ended 31 December 2013 Deposits and other accounts Deposits are recognised when the Bank enters into contractual arrangements with the counterparties, which are generally on trade date and initially measured at the amount of consideration received. Borrowing Borrowed funds include call money, term borrowings and refinance from different commercial banks, nonbanking financial institutions and central bank. Provision for taxation Income tax represents the sum of the current tax and deferred tax. Current Tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Bank s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Provision for current income tax has been made at 42.5 percent on the accounting profit made by the Bank after considering taxable allowances and disallowances as per income tax laws applicable for the Bank. Deferred Tax Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences, unused tax losses or unused tax credits can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Bank is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis. The impact on the account of changes in the deferred tax assets and liabilities has also been recognized in the Profit and Loss Account as per BAS12 "Income Taxes" (note 13.3). Retirement benefits to the employees The retirement benefits accrued for the employees of the Bank as on the reporting date have been accounted for in accordance with the provision of BAS 19 "Employee Benefits". Bases of enumerating the retirement benefits schemes operated by the Bank are outlined below: Provident fund There is a provident fund scheme under the defined contribution plan. The fund is operated by a separate board of trustees approved by the National Board of Revenue as per Income Tax Ordinance, All eligible employees contribute 10% of their basic pay to the fund. The Bank also contributes equal of employee s contribution to the fund. These contributions are invested separately. Benefits from the fund are given to eligible employees at the time of retirement/resignation as per approved rules of the fund. Staff gratuity The Bank has a separate Board of Trustees for operating the staff gratuity fund approved by the National Board of Revenue. Employees of the Bank, who served the Bank for ten years or above are entitled to get gratuity benefit at rates determined by the Service Rules of the Bank. Annual Report

115 Notes to financial statements For the year ended 31 December 2013 Superannuation fund The Bank operates a Superannuation Fund as deathcumretirement benefit for its employees. The fund is operated by a separate Board of Trustees. Provision for liabilities A provision is recognized in the balance sheet when the Bank has a legal or constructive obligation as a result of past event and it is probable that an outflow of economic benefit will be required to settle the obligations, in accordance with BAS 37 Provisions, Contingent Liabilities and Contingent Assets. No provision is recognized for any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Bank, or any present obligation that arises from past events and it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or a reliable estimates of the amount of obligation cannot be made. However, certain provisions on assets and liabilities are maintained in accordance with relevant Bangladesh Bank Circulars issued from time to time. Provision for nostro accounts Provision for nostro accounts is maintained as per circular letter no. FEPD(FEMO)/01/ dated 13 September 2005 issued by Foreign Exchange Policy Department of Bangladesh Bank. Minority Interest Minority Interest is the equity in a subsidiary not attributable, directly or indirectly, to parent. As per BFRS 10 Consolidated Financial Statements Bank presents Minority Interest separately in financial statements. Profit or loss and each component of other shareholders equity are attributed to the owners of the parent and to the Minority Interest. Total shareholders equity is attributed to the owners of the parent and to the Minority Interest even if this result in the Minority Interest having a deficit balance. 1.5 Revenue recognition Interest income According to the BAS 18 "Revenue", the interest income is recognised on accrual basis. Interest on loans and advances ceases to be taken into income when such advances are classified or treated as Sub Standard (SS) as per BRPD circular no. 14 dated 23 September 2012 and is kept in interest suspense account. Interest on classified advances is accounted for as income when realised. Profit on investment (Islami Banking Branch) Profit on investment is taken into income account from profit receivable account. Overdue charges/compensation on classified investment is transferred to profit suspense/compensation receivable account instead of income account. Investment income Interest income on investments is recognised on accrual basis except treasury bills. Capital gains on investments in shares are also included in investment income. Capital gains are recognized when these are realised. Fees and commission income Fees and commission income on services provided by the Bank are recognised as and when the services are rendered. Commission charged to customers on letters of credit and letters of guarantee are credited to income at the time of affecting the transactions. Dividend income on shares As per BAS 18 "Revenue", dividend income from investment in shares is recognised when the Bank's right to receive dividend is established. It recognized when: a. It is probable that the economic benefits associated with the transaction will flow to the entity; and b. the amount of the revenue can be measured reliably. Annual Report

116 Notes to financial statements For the year ended 31 December 2013 Interest paid on deposits and borrowings Interest paid on deposits, borrowings, etc. is accounted for on accrual basis according to the BAS 1 Presentation of Financial Statements. Profit paid on deposits (Islami Banking Branch) Profit paid to different Mudaraba depositors is recognised on accrual basis as per provisional rate. However, the final rate of profit is determined and to be paid to the depositors as per AnnexH. Other operating expenses All other operating expenses are provided for in the books of the account on accrual basis according to the BAS 1 Presentation of Financial Statements. 1.6 Reconciliation of books of account Books of account with regard to interbank (in Bangladesh and outside Bangladesh) and interbranch transactions are reconciled and no material difference was found which may affect the financial statements significantly. There exist no unreconciled items in NOSTRO accounts as at 31 December Earnings Per Share (EPS) Basic earnings per share Basic earnings per share have been calculated in accordance with BAS 33 "Earnings per Share" which has been shown in the face of the Profit and Loss Account. This has been calculated by dividing the basic earnings by the total ordinary outstanding shares. EPS of previous year was restated giving effect of issue of bonus shares for Diluted earnings per share No diluted earnings per share is required to be calculated for the year as there was no scope for dilution during the year under review. 1.8 Offbalance sheet items Offbalance Sheet items have been disclosed under contingent liabilities and other commitments as per Bangladesh Bank's guidelines. In accordance with BRPD circular no.14 dated 23 September 2012, general provision at 1 percent has been made on the outstanding balances of Offbalance Sheet exposure of the Bank as at 31 December Provision is made on the total exposure and amount of cash margin or value of eligible collateral is not deducted while computing Offbalance sheet exposure. 1.9 Memorandum items Memorandum items are maintained for those items for which the Bank has only a business responsibility and no legal commitment Reporting period These financial statements cover calendar year ended 31 December Segmental reporting period shown in below: Sl no. Name of the entity/segment Reporting period 1 01 January 2013 to 31 December Off Shore Banking Unit 01 January 2013 to 31 December Mumbai Branch, India 01 January 2013 to 31 December AB Investment Limited 01 January 2013 to 31 December AB Securities Limited 01 January 2013 to 31 December Cashlink Bangladesh Limited 01 January 2013 to 31 December AB International Finance Limited 01 January 2013 to 31 December AB Exchange (UK) Limited 01 January 2013 to 31 December Arab Bangladesh Bank Foundation 01 January 2013 to 31 December 2013 Annual Report

117 Notes to financial statements For the year ended 31 December Segment Reporting The Bank reports its operations under the following two business segments as per Bangladesh Financial Reporting Standards (BFRS)8 "Operating Segment". By Geographical Location & Segment Business Particulars Conventional Banking Inside Bangladesh Islamic Banking Investment Banking Off Shore Banking Unit India (Mumbai Adjustment Total Branch) AB Investment Limited Inside Bangladesh AB Securities Limited Subsidiaries Cash Link Bangladesh Ltd. (CBL) AB Exchange (UK) Ltd. AB Int. Finance Ltd. (Hong Kong) Income Statements Interest income Interest paid on deposits and borrowings, etc. Net interest income 1, , (66.49) (68.39) (68.39) 1, , Investment income Commission, exchange and brokerage Other operating income (1.14) 0.01 (1.47) Total operating income (48.62) (1.47) OPERATING EXPENSES Salary and allowances Rent, taxes, insurance, electricity, etc. Legal expenses Postage, stamps, telecommunication, etc. Stationery, printing, advertisement, etc. Directors' fees Auditors' fees Charges on loan losses Depreciation and repairs of Bank's assets Other expenses Total operating expenses Profit before provision (49.64) (1.47) (0.61) Provision against loans and advances Provision for diminution in value of investments Other provisions Total provision Profit before taxation Provision for taxation Net profit after taxation (Amount in Crore ) Adjustment AB Bank & its subsidiaries (28.66) (28.96) , , (11.51) (10.44) (0.82) (22.48) 1, (0.53) (8.70) (10.97) (11.51) (1.74) Annual Report

118 Notes to financial statements For the year ended 31 December 2013 Balance Sheet Particulars Conventional Banking Inside Bangladesh Islamic Banking Investment Banking PROPERTY AND ASSETS Cash Balance with other banks and financial institutions Money at call and on short notice Investments Loans and advances Fixed assets Other assets Nonbanking assets Total Assets 1, , , , , LIABILITIES AND CAPITAL Liabilities Borrowings from other banks, financial institutions and agents Deposits and other accounts Other liabilities Total Liabilities Total Shareholders' Equity Minority Interest Total Liabilities and Shareholders' Equity , , , , , Off Shore Banking Unit India (Mumbai Branch) Adjustment (143.84) (1.98) 3.21 (0.00) (563.42) (706.03) (140.73) (5.99) (526.15) (672.87) (33.16) (706.03) Total 1, , , , , , , , , , Inside Bangladesh AB Investment Limited AB Securities Limited Subsidiaries Cash Link Bangladesh Ltd. AB Exchange (UK) Ltd (20.01) AB Int. Finance Ltd. (Hong Kong) (Amount in Crore ) Adjustment AB Bank & its subsidiaries 1, (150.15) , (270.13) 14, (613.22) (1,033.50) 20, (387.82) (24.15) (64.53) (476.49) (555.44) (1.56) (1,033.50) 1, , , , , (1.56) 20, Annual Report

119 Notes to financial statements For the year ended 31 December Compliance of Bangladesh Accounting Standard (BAS) and Bangladesh Financial Reporting Standards (BFRS) While preparing the financial statements, Bank applied most of the Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS) as adopted by the Institute of Chartered Accountants of Bangladesh as applicable to the Bank: Sl No. Name of BAS No. of BAS Status 1 Presentation of Financial Statements 1 Complied 2 Inventories 2 Complied 3 Statement of Cash Flows 7 Complied 4 Accounting Policies, Changes in Accounting Estimates 8 Complied and Errors 5 Events after the Reporting Period 10 Complied 6 Construction Contracts 11 Complied 7 Income Taxes 12 Complied 8 Property, Plant and Equipment 16 Complied 9 Leases 17 Complied 10 Revenue 18 Complied 11 Employee Benefits 19 Complied 12 Accounting for Government Grants and Disclosure of 20 N/A Government Assistance 13 The Effects of Changes in Foreign Exchanges Rates 21 Complied 14 Borrowing Costs 23 Complied 15 Related Party Disclosures 24 Complied 16 Accounting and Reporting by Retirement Benefit Plans 26 Complied 17 Separate Financial Statements 27 Complied 18 Investments in Associates & Joint Ventures 28 Complied 19 Interests in Joint Ventures 31 Complied 20 Financial Instruments: Presentation 32 * 21 Earnings Per Share 33 Complied 22 Interim Financial Reporting 34 Complied 23 Impairment of Assets 36 Complied 24 Provisions, Contingent Liabilities and Contingent Assets 37 Complied 25 Intangible Assets 38 Complied 26 Financial Instruments: Recognition and Measurement 39 * 27 Investment Property 40 Complied 28 Agriculture 41 N/A Sl No. Name of the BFRS No. of BFRS Status 1 Firsttime Adoption of International Financial Reporting Standards 1 N/A 2 Share Based Payment 2 N/A 3 Business Combinations 3 Complied 4 Insurance Contracts 4 N/A 5 NonCurrent Assets Held for Sale and Discontinued Operations 5 N/A 6 Exploration for and Evaluation of Mineral Resources 6 N/A 7 Financial Instruments: Disclosures 7 * 8 Operating Segments 8 Complied 9 Consolidated Financial statements 10 Complied 10 Joint Arrangements 11 Complied 11 Disclosure of interests in other Entities 12 Complied 12 Fair Value Measurement 13 Complied * Relevant disclosures are made according to the requirement of Bangladesh Bank. Annual Report

120 Notes to financial statements For the year ended 31 December Compliance of Bangladesh Bank regulations over BAS/BFRS: Sl No. Issues BAS/BFRS Bangladesh Bank 1 Presentation As per BAS 1 Other Comprehensive Income is a component of financial statements or the elements of Other Comprehensive Income are to be included in a single Comprehensive income statement and there is no requirement to show appropriation of profit in the face of statement of comprehensive income. Again, Intangible assets must be identified, recognished, presented in the face of the balance sheet and the disclosures to be given as per BAS 38. In accordance with BRPD Circular no. 14 dated 25 June 2003 financial statements do not require to include the statement of Other Comprehensive Income and appropriation of profit is provided in the face of Profit and Loss Account. Intangible assets are provided under the head Fixed Assets. 2 Cash and cash equivalent As per BAS7 cash comprises cash in hand & demand deposits and Cash equivalents recognises the shortterm, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Therefore, some items like Balance with Bangladesh Bank on account of CRR/ SLR are not part of cash and cash equivalents as those are not readily available. Balance with Bangladesh Bank is treated as cash and cash equivalents as per BRPD Circular no. 14 dated 25 June Investment in shares and securities As per requirements of BAS 39 investment in shares and securities generally falls either under at fair value through profit and loss account or under available for sale where any change in the fair value (as measured in accordance with BFRS 13) at the yearend is taken to profit and loss account or revaluation reserve respectively. As per BRPD Circular no. 14 dated 25 June 2003, provisions should be made for any loss arising from the diminution in value of investments. But, as per DOS Circular No.04 dated 24 November 2011, provisions can be made for any loss arising from the diminution in value of investments after netting of gain. 4 Revaluation gains/losses on Government securities As per requirement of BAS 39 where securities will fall under the category of Held for Trading (HFT), any change in the fair value of Held For Trading (HFT) assets is recognised through profit and loss account. Securities designated as Held to Maturity (HTM) are measured at amortised cost method and interest income is recognised through the profit and loss account. As per Bangladesh Bank DOS circular letter no. 05 dated 26 May 2008 and DOS circular no. 05 dated 28 January HTM measured at amortised cost at each year end by taking into account any discount or premium in acquisition. Amortised amount of such premium are booked into Profit and Loss Account or discount is booked to reserve until maturity/disposal. In case of HFT after initial recognition, investments are revalued at mark to market on weekly basis. Decrease in the book value is recognised in the Profit and Loss Account and any increase is transferred to revaluation reserve account. 5 Repo and reverse repo transactions When an entity sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or similar asset) at a fixed price on a future date (REPO), the arrangements is accounted for as a deposit as oppose to a sale, and the underlying asset continues to be recognized in the entity's financial statements. Such transaction do not satisfy derecognition criteria specified in BAS 39. Same rule applies to the opposite side of the transaction (reverse REPO). As per Bangladesh bank Circulars / guidelines, when a Bank sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset) at a fixed price on future date (REPO), the arrangement is accounted for as a normal sales transactions and the financial assets should be derecognized in the seller's book and recognized in the buyer's book. Annual Report

121 Notes to financial statements For the year ended 31 December Compliance of Bangladesh Bank regulations over BAS/BFRS: (cont.) Sl No. Issues BAS/BFRS Bangladesh Bank 6 Provision on loans and advances/ investments As per BAS 39 an entity should start the impairment assessment by considering whether objective evidence of impairment exists for financial assets that are individually significant. For financial assets that are not individually significant, the assessment can be performed on an individual or collective (portfolio) basis. Such provision shall be netted off against loans and advances. As per BRPD circular No.14 (23 September 2012), BRPD circular No. 19 (27 December 2012) and BRPD circular No. 05 (29 May 2013) a general provision at 0.25% to 5% under different categories of unclassified loans (good/standard loans) has to be maintained regardless of objective evidence of impairment. Also provision for substandard loans, doubtful loans and bad losses has to be provided at 20%, 50% and 100% respectively for loans and advances depending on the duration of overdue. Again as per BRPD circular no. 10 dated 18 September 2007 and BRPD circular no. 14 dated 23 September 2012, a general provision at 1% is required to be provided for all offbalance sheet exposures. Such provision policies are not specifically in line with those prescribed by BAS 39. Also for disclosure such provision shall be shown as liability as opposed to netting of against loans and advances. 7 Recognition of interest in suspense Loans and advances to customers are generally classified as 'loans and receivables' as per BAS 39 and interest income is recognised through effective interest rate method over the term of the loan. Once a loan is impaired, interest income is recognised in profit and loss account on the same basis based on revised carrying amount. As per BRPD circular no. 14 dated 23 September 2012, once a loan is classified; interest on such loans are not allowed to be recognised as income, rather the corresponding amount needs to be credited to interest suspense account, which is presented as liability in the balance sheet. 8 Nonbanking asset No indication of Nonbanking asset is found in any BFRS. As per BRPD circular No. 14, dated 25 June 2003 there must exist a face item named Nonbanking asset. 9 Cash flow statement The cash flow statement can be prepared using either the direct method or the indirect method as per BAS7. The presentation is selected to present these cash flows in a manner that is most appropriate for the business or industry. The method selected is applied consistently. As per BRPD circular No. 14, dated 25 June 2003 cash flow is the mixture of direct and indirect methods. 10 Financial Guarantee Financial guarantee liabilities are recognized initially at their fair value (as measured in accordance with BFRS 13), and the initial fair value is amortised over the life of the financial guarantee. The financial guarantee liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment when a payment under the guarantee has become probable. Financial guarantees are included under other liabilities. As per BRPD Circular no. 14 dated 25 June 2003, financial guarantees such as Letter of Credit, Letter of Guarantee, Acceptance and Endorsement, etc. will be treated as off balance sheet items. Annual Report

122 Notes to financial statements For the year ended 31 December Regulatory and legal compliance The Bank complied with the requirement of the following regulatory and legal authorities: i. The Bank Company (Amendment) Act, 2013 ii. The Companies Act 1994 iii. Rules, regulations and circulars issued by the Bangladesh Bank from time to time iv. The Securities and Exchange Rules 1987 v. The Securities and Exchange Ordinance 1969 vi. The Securities and Exchange Commission Act 1993 vii. The Securities and Exchange Commission (Public Issues) Rules 2006 viii. The Income Tax Ordinance 1984 and Rules ix. The Value Added Tax (VAT) 1991 and Rules x. Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE) and Central Depository Bangladesh Limited (CDBL) rules and regulations Risk management Risk is defined as uncertainties resulting in adverse variation of profitability or in losses, financial or otherwise. The risk management of the Bank covers core risk areas of banking viz, credit risk, liquidity risk, market risk that includes foreign exchange risk, interest rate risk, equity risk, operational risk and reputation risk. The objective of the risk management is that the Bank evaluates and takes well calculative business risks and thereby safeguarding the Bank's capital, its financial resources and profitability from various business risks through its own measures and through implementing Bangladesh Bank's guidelines and following some of the best practices as under: Credit risk It arises mainly from lending, trade finance and treasury businesses. This can be described as potential loss arising from the failure of a counter party to perform as per contractual agreement with the Bank. The failure may result from unwillingness of the counter party or decline in his/ her financial condition. Therefore, the Bank's credit risk management activities have been designed to address all these issues. The Bank has segregated duties of the officers/executives involved in credit related activities. A separate Corporate Division has been formed at Head Office which is entrusted with the duties of maintaining effective relationship with the customers, marketing of credit products, exploring new business opportunities, etc. Moreover, credit approval, administration, monitoring and recovery functions have been segregated. For this purpose, two separate divisions have been formed within the Credit Division. These are (a) Credit Risk Management Division and (b) Credit Administration Division. Credit Risk Management Division is entrusted with the duties of maintaining asset quality, assessing risk in lending to a particular customer, sanctioning credit, formulating policy/strategy for lending operation, etc. Adequate provision has been made on classified loans/investments. A thorough assessment is done before sanction of any credit facility at Credit Risk Management Division. The risk assessment includes borrower risk analysis, financial analysis, industry analysis, historical performance of the customer, security of the proposed credit facility, etc. The assessment process starts at Corporate Division by the Relationship Manager/Officer and ends at Credit Risk Management Division when it is approved/declined by the competent authority. Credit approval authority has been delegated to the credit committee. In determining single borrower/large loan limit, the instructions of Bangladesh Bank are strictly followed. Internal audit is conducted at periodical intervals to ensure compliance of Bank s and Regulatory polices. Loans are classified as per Bangladesh Bank s guidelines. Concentration of single borrower/large loan limit is shown in note7.6. Operational risk Operational risk address the risk associated with fraud, forgery, unauthorised activities, error, omission, system failure and external events among others. Bank is managing these risk through written procedures, regular training and awareness programs. Departmental Control Function Checklist (DCFCL), Quarterly Operations Report, Loan Documentation Checklist etc. are in place covering all probable risks associated with bank s business and operations. Surprise inspections are also made on a regular basis to make sure that all control tools are functioning properly. Market risk The exposure of market risk of the Bank is restricted to foreign exchange risk, interest rate risk and equity position risk. Foreign exchange risk Foreign exchange risk is defined as the potential change in earnings due to change in market prices. The foreign exchange risk of the Bank is minimal as all the transactions are carried out on behalf of the customers against underlying L/C commitments and other remittance requirements. Annual Report

123 Notes to financial statements For the year ended 31 December 2013 Financial Institution and Treasury (FIT) Division independently conducted the foreign exchange transactions and the Mid office and the Back office of Treasury is responsible for verification of the deals and passing of their entries in the books of account. All foreign exchange transactions are revalued at Market rate as determined by Bangladesh Bank at the month end. All nostro accounts are reconciled on a monthly basis and outstanding entry is reviewed by the management for its settlement. The position maintained by the Bank at the end of day was within the stipulated limit prescribed by the Bangladesh Bank. Interest rate risk Interest rate risk may arise from trading portfolio and non trading portfolio. The trading portfolio of the bank consists of government treasury bills, bond, etc. The short term movement in interest rate is negligible or nil. Interest rate risk of non trading business arises from mismatches between the future yield of an asset and its funding cost. Asset Liability Committee (ALCO) monitors the interest rate movement on a regular basis. Equity risk Equity risk arises from movement in market value of equities held. The risks are monitored by the Investment Banking Division under a well designed policy framework. Adequate provision was maintained by the Bank for diminution of market value of Investments. Liquidity risk The objective of liquidity risk management is to ensure that all foreseeable funding commitments and deposit withdrawals can be met when due. To this end, the Bank is maintaining a diversified and stable funding base comprising of core retail and corporate deposits and institutional balance. Management of liquidity and funding is carried out by Financial Institution and Treasury (FIT) Division under approved guidelines. FIT front office is supported by a very structured Mid Office and Back Office. The liquidity management is monitored by Asset Liability Committee (ALCO) on a regular basis. A written contingency plan is in place to manage extreme situation. Risk arising from money laundering considers prevention of money laundering risk not only as a compliance requirement imposed by the law of the country but also as one of its core business values. The board of directors and senior management are firmly committed to combat money laundering. Every year, a message from the President and Managing Director s office goes to all employees' of the Bank reiterating the importance of the issue. There is a high profile Central Compliance Unit (CCU) in place to oversee the anty money laundering activities. The president and managing director himself supervise the function of CCU's. Operation has separated and dedicated headcount for surveillance of the anti money laundering functions across the bank. Training and awareness programs are regularly held to make all employees' aware of the issue. Bank has also undertaken campaign against money laundering in electronic media. Internal Control and Compliance Risk Internal Control and Compliance Division (ICCD) of the bank performs three core functions Internal Audit, Monitoring and Compliance in order to mitigate the internal control and compliance risk. ICCD conducts Risk Based Audit and Annual Audit of the Branches. Audit of Head Office Divisions also come under ICCD. ICCD monitors compliance of Internal as well as Bangladesh Bank Audit Reports including Bangladesh Bank Special Audit Reports on Core Risks. Besides, Special Audit on some specific issues like yearend Cash Position, Security Stock verification etc. are also done by ICCD. Information and Communication Technology (ICT) Security Risk IT division of AB Bank took several initiatives to minimize the ICT related risk. Among those ATM Switch Migration from Euronet itm to ECS itx, Automatic Voltage Regulator for Head Office Data Center and Disaster Recovery Site, CISCO IronPort Web Security implementation to protect Internet threat, Building Management System (BMS) expanded to protect AB Bank Data Center and Disaster Recovery Site from fire and water and Implemented CISCO Nexus 7009 Switch into DC and DR which is the first time for any financial institution in Bangladesh Environment Risk Management (ERM) Bangladesh Bank issued Guidelines on Environment Risk Management (ERM) to streamline solutions for managing the environmental risks in the financial sector Ref: BRPD Circular No.01/2011 dated and BRPD Circular no.02 dated 27 February, 2011 respectively. Bank accordingly introduced the Guideline on Environment Risk Management on June 15, These ERM guidelines are an attempt to incorporate the environmental impact of a business into the lending process, so that the environment gets due consideration in the appraisal process. Annual Report

124 Notes to financial statements For the year ended 31 December 2013 Environmental risk is a facilitating element of credit risk arising from such environmental issues. These can be due to environmental impacts caused by and/or due to the prevailing environmental conditions. These increase risks as they bring an element of uncertainty or possibility of loss in the context of a financing transaction. The Bank is complying with Bangladesh Bank Guidelines to the above effect from time to time and reporting activities on ERM and Green Banking every quarter Credit Rating of the Bank Credit rating of the Bank in last five years are: Year Date of Rating Long term Short term Jan to Dec May 2013 AA3 ST2 Jan to Dec June 2012 AA3 ST2 Jan to Dec May 2011 AA3 ST2 Jan to Dec June 2010 AA3 ST1 Jan to Dec May 2009 A1 ST Events after Reporting Period As per BAS 10 "Events after Reporting Period" events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. Two types of events can be identified: (a) those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the reporting period); and (b) those that are indicative of conditions that arose after the reporting period (no adjusting events after the reporting period). There was no material events which have occurred after the reporting period which could affect the values stated in the financial statements Related party disclosures A party is related to the company if: (i) directly or indirectly through one or more intermediaries, the party controls, is controlled by, or is under common control with, the company; has an interest in the company that gives it significant influence over the company; or has joint control over the company; (ii) the party is an associate; (iii) the party is a joint venture; (iv) the party is a member of the key management personnel of the Company or its parent; (v) the party is a close member of the family of any individual referred to in (i) or (iv); (vi) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or (vii) the party is a postemployment benefit plan for the benefit of employees of the company, or of any entity that is a related party of the company. a) Significant contracts where the Bank is a party and wherein Directors have interest: Name of contract Lease agreement with AB Bank Ltd. Name of the Party Elite International Ltd. Name of Director and Related by Salim Ahmed, Feroz Ahmed & B.B. Saha Roy Relationship Common Director b) Related party transactions: Name of related party Relationship Nature of transaction Amount in BDT Elite International Ltd. Common Director Rent of warehouse 569,250 Annual Report

125 Notes to financial statements For the year ended 31 December Audit Committee of the Board of Directors i) Particulars of Audit Committee The Audit Committee of the Board was duly constituted by the Board of Directors of the Bank in accordance with the BRPD Circular No. 11 dated October 27, 2013 issued by Bangladesh Bank. The Committee was formed comprising 5 (five) members of the Board: Sl no Name Mr. Shishir Ranjan Bose, FCA Mr. M. Wahidul Haque Ms. Runa Zakia Shahrood Khan Mr. Syed Afzal Hasan Uddin Mr. M.A. Awal Status with Bank Director Chairman Director Director Director Status with Committee Chairman Member Member Member Member The Company Secretary acts as Secretary of the Audit Committee of the Board. Duration With effect from 16 July 2008 With effect from 04 February 2008 With effect from 27 December 2013 With effect from 12 July 2011 With effect from 12 July 2011 Educational/ Professional Qualification Fellow of Chartered Accountants B.A., LLB B.A. (Hons.) BarristeratLaw B.Com. ii) Meeting held with Audit Committee During the year 2013, the Audit Committee conducted sixteen (16) meetings in which, among others, the following issues were reviewed and discussed: comprehensive inspection report of Bangladesh Bank including status of compliance thereof; inspection reports of branches/head Office conducted by Bank's internal inspection team; financial statements of the Bank; quarterly and halfyearly accounts of the Bank for the year 2013; review of the financial statements of the subsidiary companies; and status of compliance of different rules and regulations. iii) Steps taken for implementation on effective internal control procedure of the Bank The Committee placed its report regularly to the Board of Directors of the Bank mentioning its review results and recommendations on internal control system, compliance of rules and regulations and establishment of good governance within the organization Shariah Council Members of AB Bank Shariah Supervisory Committee are as under: Sl no. Name Status with the Committee Educational/ Professional Qualification 1 Jb. Shah Abdul Hannan Chairman Masters in Political Science from Dhaka University & Scholar of Islamic Studies 2 Jb. M. Azizul Huq ViceChairman M.A (Economics) Dhaka University & Scholar of Islamic Banking. 3 Jb. Md. Harun Rashid Member M.A, M. Phil PhD, Aligor University, India. Islamic Law (1st class), Dewband, India. FazelEDewband (1st class), Dewband, India. 4 Jb. Muhammad Musa Member Kamil: Madrasah Education Board, Dhaka. B.Com. (Hons.) & M.Com, Dhaka University. Prominent author and research scholar in Quran & Hadith. 5 Jb. M. Wahidul Haque Chairman, BOD, ABBL Member BA, LLB 6 Jb. M. Fazlur Rahman Member B.COM, MBA & FCA 7 Jb. Mukhlesur Rahman Member Secretary Kamil, Madrasah Education Board, Dhaka, B.A (Hons) & M.A in Islamic Studies, Dhaka University. Higher Diploma in Arabic Language, Dhaka University. Annual Report

126 Notes to financial statements For the year ended 31 December 2013 During the year 2013, the AB Bank Shariah Supervisory Committee met in 4 (four) meetings (2 meetings of full Committee and 2 meeting of it's Standing Committee). In those meetings different issues were discussed and prudent guidance/opinion were given among which the important ones are as under: Reviewing the Shariah Audit 2012 of Islami Banking Branch Reviewing the Shariah Audit 01 January 2013 to 31 March 2013 of Islami Banking Branch Approving the Final Account, 2012 of AB Bank Islami Banking Branch 2. General i. Figures relating to the previous year included in this report have been rearranged, wherever considered necessary, to make them comparable with those of the current year without, however, creating any impact on the operating result and value of assets and liabilities as reported in the financial statements for the current year. ii. Figures in these notes and in the annexed financial statements have been rounded off to the nearest. iii. These notes form an integral part of the annexed financial statements and accordingly are to be read in conjunction therewith. Balance Sheet 3. Cash Cash in hand (Note: 3.1) Balance with Bangladesh Bank and its agent bank(s) (Note: 3.2) 3(a) Consolidated Cash AB Investments Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 3.1 Cash in hand In local currency In foreign currency 3.1(a) Consolidated Cash in hand AB Investments Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 3.2 Balance with Bangladesh Bank and its agent bank(s) Balance with Bangladesh Bank In local currency In foreign currency Sonali Bank Limited (as an agent bank of Bangladesh Bank) local currency Balance with Bangladesh Bank local currency Balance as per Bank Ledger Unresponded debit entries: Bangladesh Bank statement AB Bank's ledger Unresponded credit entries: Bangladesh Bank statement AB Bank's ledger ,325,369,404 10,034,147,846 11,359,517,250 11,359,517,250 25,000 16,319 26,941 2,794,402 11,362,379,912 1,306,186,571 19,182,833 1,325,369,404 1,325,369,404 25,000 16,319 26,941 2,794,402 1,328,232,066 9,351,408, ,257,224 9,605,666, ,481,760 10,034,147,846 9,351,408,862 89,675,190 89,675, ,377,542 5,913, ,463,734 9,485,111, ,231,674,876 8,391,165,655 9,622,840,530 9,622,840,530 25,000 13,727 7,155 9,622,886,412 1,209,413,399 22,261,477 1,231,674,876 1,231,674,876 25,000 13,727 7,155 1,231,720,758 7,688,919, ,610,156 8,013,529, ,635,750 8,391,165,655 7,688,919,749 58,110,442 15,610,442 42,500, ,379,251 24,559, ,820,172 7,760,188,558 Annual Report

127 Notes to financial statements For the year ended 31 December 2013 Bangladesh Bank Account represents outstanding transactions (net) originated but yet to be responded at the Balance Sheet date. However the status of unresponded entries as of is given below: Period of Unreconciliation Less than 3 months 3 months to less than 6 months 6 months to less than 12 months 12 months and more Total Number of unresponded entry Dr Cr Unresponded amount Dr. 89,175, ,000 89,675,190 Cr. 223,187, , ,377, Balance with Bangladesh BankForeign currency Balance as per Bank Ledger 254,257, ,610,156 Unresponded debit entries: Bangladesh Bank statement AB Bank's ledger 23,359,910 23,359,910 1,164, , ,258 Unresponded credit entries: Bangladesh Bank statement AB Bank's ledger 220,878,091 79,227, ,650, ,825,274 38,284, ,540,386 Balance as per Bangladesh Bank Statement 451,775, ,270,922 Bangladesh Bank Account represents outstanding transactions (net) originated but yet to be responded at the Balance sheet date. However the status of unresponded entries as of is given below: Period of Unreconciliation Less than 3 months 3 months to less than 6 months 6 months to less than 12 months 12 months and more Total Number of unresponded entry Dr. 3 3 Cr Unresponded amount Dr. 23,359,910 23,359,910 Cr. 219,700,937 1,177, ,878, (a) Consolidated Balance with Bangladesh Bank and its agent bank(s) AB Investments Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 10,034,147,846 10,034,147,846 8,391,165,655 8,391,165,655 Annual Report

128 Notes to financial statements For the year ended 31 December Statutory deposits Conventional Banking (Inside Bangladesh) Cash Reserve Requirement and Statutory Liquidity Ratio Cash reserve requirement and statutory liquidity ratio have been calculated and maintained in accordance with section 33 of the Bank Company (Amendment) Act, 2013 and Bangladesh Bank MPD's subsequent circular nos. 04 and 05 dated 01 December The statutory cash reserve requirement is on the Bank's time and demand liabilities at the rate of 6% and has been calculated and maintained with Bangladesh Bank in current account while statutory liquidity ratio of 19% is required, including cash reserve requirement, on the same liabilities is also maintained in the form of treasury bills, bonds and debentures including foreign currency balance with Bangladesh Bank. Both the reserves are maintained by the Bank in excess of the statutory requirements, as shown below: (a) Cash Reserve Requirement (CRR) As per Bangladesh Bank MPD Circular No. 04 dated 01 December 2010, Bank has to maintain CRR at 6 percent on fortnightly cumulative average basis and minimum CRR at 5.5 percent on daily basis i. Daily Position as on the reporting date Required reserve Actual reserve maintained Surplus 8,941,240,067 9,252,441, ,201,360 7,470,664,500 7,667,490, ,826,012 As per Bank ledger, balance with Bangladesh Bank (local currency) is BDT 9,128,739, while as per Bangladesh Bank Statement balance is BDT 9,252,441,427. Difference between the balance as per Bank Ledger and as per the Bangladesh Bank Statement is properly reconciled and adjusted accordingly. ii. Fortnightly cumulative Position As per Bangladesh Bank MPD Circular No. 04 dated 01 December 2010, Bank has to maintain 6 percent CRR on fortnightly cumulative average basis Required reserve (6% of total time & demand liabilities) Actual reserve maintained Surplus 152,001,081, ,399,300,644 1,398,219, ,001,296, ,617,519,795 1,616,223,295 (b) Statutory Liquidity Ratio (SLR) Required reserve (19% of total time & demand liabilities) Actual reserve maintained Total surplus 28,313,926,880 32,904,213,205 4,590,286,325 23,657,104,250 28,550,377,784 4,893,273,534 (c) As per MPD Circular # 04 & 05 dated 01 December 2010 all scheduled Banks have to maintain CRR and SLR (including CRR) at 6.00 percent and percent daily of their total time and demand liabilities on biweekly average basis respectively, where the Bank maintained at the year ended 6.21 percent and percent respectively. Components of Statutory Liquidity Ratio (SLR) Cash in hand Balance with Bangladesh Bank Balance with Sonali Bank TT in Transit HTM Securities HFT Securities Other Eligible Security 1,318,900,000 9,252,438, ,500,000 16,099,330,147 5,795,044,292 10,000,000 32,904,213,205 1,223,800,000 7,624,990, ,600,000 42,500,000 15,489,345,473 3,777,141,799 15,000,000 28,550,377,784 Annual Report

129 Notes to financial statements For the year ended 31 December 2013 Islamic Banking Cash Reserve Requirement and Statutory Liquidity Ratio Cash reserve requirement and statutory liquidity ratio have been calculated and maintained in accordance with section 33 of the Bank Company (Amendment) Act, 2013 and subsequent circular of Bangladesh Bank MPD's (nos. 04 and 05 dated 01 December 2010). The statutory Cash Reserve Requirement (CRR) is required on the Bank's time and demand liabilities at the rate of 6% and has been calculated and maintained with Bangladesh Bank in AlWadia Current Account while Statutory Liquidity Ratio (SLR) of 11.50% is required, including cash reserve requirement, on the same liabilities is also maintained in the form of BGIIB including foreign currency balance with Bangladesh Bank. Both these are maintained by the Bank in excess of the statutory requirements, as shown below: (a) Cash Reserve Requirement (CRR) Required reserve Actual reserve maintained Surplus 207,540, ,669,787 15,129, ,914, ,811,832 6,897,222 (b) Statutory Liquidity Ratio (SLR) Total required reserve Total actual reserve held Total surplus 397,785, ,775,049 18,989, ,836, ,611,832 6,775,502 Mumbai Branch Cash reserve ratio and statutory liquidity ratio Cash reserve ratio and statutory liquidity ratio have been calculated and maintained in accordance with Section 24 of the Bank Company (Amendment) Act 2013, Section 42 (2) of the RBI Act 1934 and RBI circular nos. DBOD. No.Ret. BC.22/ / (a) The statutory cash reserve ratio is required on the Bank's time and demand liabilities at the rate of 4.00 percent for & 4.25 percent for and has been calculated and maintained with RBI in current account while statutory liquidity ratio of percent for & percent for is required, on the same liabilities is also maintained in the form of treasury bills, and bonds including foreign currency balance with RBI. Both the reserves are maintained by the Bank in excess of the statutory requirements, as shown below: Cash Reserve Ratio (CRR) Required reserve Actual reserve maintained Surplus 13,804,595 16,619,195 2,814,600 25,389,338 26,538,311 1,148,974 (b) Statutory Liquidity Ratio (SLR) Required reserve Actual reserve maintained Surplus 230,525, ,552,189 97,026, ,595, ,529,525 77,933,843 Total required reserve Total actual reserve held Total surplus 244,329, ,171,384 99,841, ,985, ,067,836 79,082,816 Annual Report

130 Notes to financial statements For the year ended 31 December Balance with other banks and financial institutions In Bangladesh Outside Bangladesh 4(a) Consolidated balance with other banks and financial institutions 4,744,159,686 2,494,830,373 7,238,990,059 5,616,079,788 3,260,994,166 8,877,073,955 In Bangladesh Outside Bangladesh (Nostro Accounts) 4.1 In Bangladesh (Note: 4.1.a) (Note: 4.2.a) 4,746,243,512 1,237,717,618 5,983,961,130 5,621,794,561 1,851,770,306 7,473,564,867 Current Deposits Standard Chartered Bank, Dhaka City Centre Branch Agrani Bank Ltd., VIP Road Branch, Sylhet Agrani Bank Ltd., Local Office, Dhaka Islami Bank Bangladesh Ltd., Local Office Agrani Bank Ltd., Bhairab Bazar Branch Janata Bank Ltd., Jessore Branch Janata Bank Ltd., Corporate Branch, Bogra Agrani Bank Ltd., Mymensingh Branch Agrani Bank Ltd., Thana Road Branch, Bogra RAKUB, Bogra Branch Sonali Bank Limited, Corporate Br. Shilpa Bahaban Agrani Bank Ltd., Shaheb Bazar Branch, Rajshahi Janata Bank Ltd., Rajshahi Branch IFIC Bank Ltd., Rajshahi Branch Rupali Bank Ltd., Rajshahi Branch Janata Bank Ltd., Rangpur Branch RAKUB, Rangpur Branch Rupali Bank Ltd., Rangpur Branch Janata Bank Ltd., Chapai Nawabganj Branch Special Notice Deposits Agrani Bank Ltd., Rangpur Branch Agrani Bank Ltd., Saidpur Branch Agrani Bank Ltd., VIP Road Branch, Sylhet Agrani Bank Ltd., Bogra Branch Agrani Bank Ltd., Jhikargachha Branch Agrani Bank Ltd., Sir Iqbal Road Branch, Khulna Agrani Bank Ltd., Naogaon Branch Agrani Bank Ltd., Jessore Branch Agrani Bank Ltd., Moulvi Bazar Branch Agrani Bank Ltd., Satkhira Branch Agrani Bank Ltd., Court Road Branch, Narayanganj Agrani Bank Ltd., Chawk Bazar, Barisal Southeast Bank Ltd., Principal Branch Agrani Bank Ltd., Principal Branch, Dhaka Bangladesh Krishi Bank, Barishal Janata Bank Ltd., Barisal Branch Standard Chartered Bank, Dhaka City Centre Branch 978,435 16,145 24,885 17, ,800 2,497 10,054,087 5,012,016 4,075 5,000 2, ,000 45,037,086 35,223 10,074,374 1,323 71,281,854 32,606,372 16,482,198 32,798 7,530 26,004,011 95, ,612 32,098,627 5,617,075 13, ,153 48,120 9,500,215 13,042 4,536 1,043, ,880 35,845 24,885 11, ,764 6,892 20,005,912 1,850 20,185, , ,655 31,766,275 9,493 24,271 1,323 72,268, ,732 6,896,328 32,956 7,530 3,003,011 97,804 2,638,195 5,047,900 3,013,881 13,468 2,034 2,593,733 48,120 17,510,806 7,977,102 5,477 1,044,033 Annual Report

131 Notes to financial statements For the year ended 31 December Special Notice Deposits (cont.) Islami Bank Bangladesh Ltd., Head Office Complex Corporate Br. Bank Asia Ltd., Islami Banking Window, Shantinagar Branch First Security Islami Bank Ltd, Dilkusha Br. AlArafah Islami Bank Ltd, Dilkisha Branch Shahjalal Islami Bank Ltd, Dhaka Main Branch The City Bank Ltd, Islamic Banking Br, Paltan, Dhaka Bank Alfalah Ltd, Main Branch, Dhaka Agrani Bank Ltd., Islami Banking Window, Amin Court Corp. Br. Jamuna Bank Ltd. Nayabazar Islami Banking Br. Savings Deposits Social Islamic Bank Ltd. Principal Branch Southeast Bank Ltd., Motijheel Branch EXIM Bank Ltd, Motijheel Branch Fixed Deposits The Premier Bank Ltd. Hajj Finance Company Ltd. Southeast Bank Ltd. First Security Islami Bank Ltd. Shahjalal Islalmi Bank Ltd. Social Islami Bank Ltd. Phoenix Finance and Investment Ltd. AlArafah Islami Bank Limited EXIM Bank Ltd. The City Bank Ltd. Agrani Bank Ltd. ICB Islamic Bank Ltd. Jamuna Bank Ltd. Union Bank Ltd. Islamic Finance & Investment Ltd. 4.1.a Consolidated In Bangladesh AB Investments Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Inter company transaction 16,196,533 1,275,359 10,290, ,620,783 7,434, , ,442, ,503,196 10,906,565 1,303,998, ,072 6,452, ,595 7,239, ,000, ,000, ,000, ,000, ,000, ,000, ,640, ,000, ,000, ,000, ,000,000 3,361,640,000 4,744,159,686 4,744,159, , ,022,444 8,030,892 4,987,656, ,413,065 4,746,243,512 65,519 1,222,860 9,882,119 97,488,415 6,737,868 10,295, ,356, ,518, ,672,406 7,446,687 54,528,107 1,163,704 63,138, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000,000 4,860,000,000 5,616,079,788 5,616,079, , ,287,732 5,662,854 5,739,616, ,822,307 5,621,794,561 Annual Report

132 Notes to financial statements For the year ended 31 December Outside Bangladesh Current Deposits The Bank of Tokyo Mitsubishi Ltd. HSBC Plc HSBC AUST JP Morgan Chase Bank Sonali Bank (Kolkata) Sonali Bank (UK) Myanmar Economic Bank Citibank NA Hatton National Bank Ltd. Commerz Bank AG AB International Finance Ltd. State Bank of India NIB Bank Ltd. Mashreq Bank Psc Nepal Bangladesh Bank Ltd. Bank of Bhutan Habib Bank UK Wachovia Bank/Wells Fargo N.A Habib America Bank Commerz Bank AG Hypovereins Bank HSBC,Karachi National Commercial Bank Ltd. Habib Metro Bank U.B.A.FBANQUES Habib Bank AG COMMERZ BK CAD COMMERZ BK CHF JPMC NYOBU HSBC, New York UBAF (Hong Kong) Limited Reserve Bank of India HDFC BANK CSGL HDFC Bank Ltd. Commerz Bank AG (Euro) HSBC (Euro) HSBC (GBP) HSBC (USD) HSBC (ACUD) Habib American Bank Ltd. Citi Bank OBU HSBC NY (OBU) Standard Chartered Bank JP Morgan Chase Bank (Details are given in AnnexA) 894,135 16,830,487 3,151, ,546,295 3,310, ,328,099 31,878 75,332, ,465 21,396,747 1,260,016,500 1,226,799 28,820,563 2,923,964 7,857,287 10,844,372 39,081,544 31,814,528 27,109,939 5,081,425 28,511,749 29,036, ,816 6,343,841 13,222, ,469 16,619, ,996 22,770,443 6,175,319 3,717,213 1,157,427 12,650, ,048,987 7,402,943 30,166, ,888 68,447,077 2,494,830,373 2,062,777 13,338, ,093,091 3,400,196 11,184,877 32,738 96,298, ,725 32,101,352 1,454,865,178 1,255, ,545 53,599,443 3,450,095 7,542, ,084,119 52,518, ,507,255 2,810,857 87,508 36,003,642 5,669,160 1,581, , ,653,557 61,257 26,538, ,738 14,420,730 14,842,050 2,219,242 2,824, ,809, ,729, , ,699,800 3,627,317 3,587,797 3,829,006 3,260,994,166 Annual Report

133 Notes to financial statements For the year ended 31 December a Consolidated Outside Bangladesh (Nostro Accounts) AB Investments Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Inter company transactions 4.3 Accountwise/grouping of balance with other banks and financial institutions Current deposits Savings deposits ShortNotice Deposits Fixed deposits 4.4 Maturity grouping of balance with other banks Repayable on demand up to 3 months over 3 months but below 1 year over 1 year but below 5 years over 5 years 5. Money at call and on short notice In Bangladesh (Note: 5.1) Outside Bangladesh (Note: 5.2) 5.1 In Bangladesh With banking companies Prime Bank Ltd Mercantile Bank Ltd. Mutual Trust Bank Ltd. Uttara Bank Ltd. Eastern Bank Ltd. Basic Bank Ltd. Citibank NA Southeast Bank Ltd. With nonbanking financial institutions Phoenix Finance Ltd. IDLC BD Ltd. Lanka Bangla Finance Ltd. Delta Brac Housing Ltd. Peoples Leasing International Leasing At short notice 2,494,830,373 1,395,886 1,563,984 2,497,790,243 1,260,072,624 1,237,717,618 2,566,112,226 7,239,617 1,303,998,215 3,361,640,000 7,238,990,059 3,119,318,559 1,119,450,250 3,000,221,250 7,238,990, ,000, ,387, ,387, ,000,000 50,000,000 50,000, ,000, ,000, ,000, ,000,000 3,260,994,166 41,332,012 4,397,182 3,306,723,360 1,454,953,055 1,851,770,306 3,333,263,051 63,138, ,672,406 4,860,000,000 8,877,073,954 3,443,145,577 2,374,216,779 3,059,711,599 8,877,073,955 3,300,000, ,790,000 3,671,790, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000,000 3,100,000, ,000, ,000,000 3,300,000,000 Annual Report

134 Notes to financial statements For the year ended 31 December On calls and placements Prime Bank Ltd. Mercantile Bank Ltd. Mutual Trust Bank Ltd. Uttara Bank Ltd. Eastern Bank Ltd. Basic Bank Ltd. Citibank NA Southeast Bank Ltd. Phoenix Finance Ltd. IDLC BD Ltd. Lanka Bangla Finance Ltd. Delta Brac Housing Ltd. Peoples Leasing International Leasing 5.2 Outside Bangladesh HDFC Bank Ltd. Abu Dhabi Commercial Bank 5(a) Consolidated money at call and on short notice AB Investments Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 6. Investments Nature wise: Held for Trading Held to Maturity Others Claim wise: Government securities (Note: 6.1) Other investments (Note: 6.2) 6 (a) Consolidated investments AB International Finance Limited AB Investment Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Intergroup transaction 150,000,000 50,000,000 50,000, ,000, ,000, ,000, ,000, ,387, ,387, ,387, ,387,500 5,795,044,292 16,462,398,836 6,418,252,905 28,675,696,033 22,327,865,346 6,347,830,687 28,675,696,033 28,675,696, ,286, ,743,904 24,571,230 29,617,297,504 29,617,297, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000,000 3,300,000,000 3,300,000, ,310,000 87,480, ,790,000 3,671,790,000 3,671,790,000 3,777,141,799 15,928,683,098 6,408,962,750 26,114,787,647 19,743,454,873 6,371,332,773 26,114,787,647 26,114,787, ,381,828 67,495,079 26,932,725 26,949,597,279 26,949,597,279 Annual Report

135 Notes to financial statements For the year ended 31 December Government securities Treasury bills 30 days Bangladesh Bank bills Treasury bonds Debentures Bangladesh House Building Finance Corporation (Maturity date: 14 March 2015, interest rate: 5.50%) Bangladesh Bank Islami Investment bonds Prize bonds Maturity wise Treasury Bills & Bonds 2,011,667, ,364,774 19,610,962,119 10,000, ,000,000 3,870,800 22,327,865, ,517,571 1,217,326,894 17,637,791,008 15,000, ,800,000 5,019,400 19,743,454,873 (a) 30 Days Bangladesh Bank Bill 499,364,774 1,217,326,894 (b) Treasury Bill (i) 91 Days Treasury Bill (ii) 182 Days Treasury Bill (iii) 364 Days Treasury Bill Total Treasury Bill 398,408, ,346,392 1,135,912,828 2,011,667, ,375, ,142, ,517,571 (c) Treasury Bond (i) 05 Years Treasury Bond (ii) 10 Years Treasury Bond (iii) 15 Years Treasury Bond (iv) 20 Years Treasury Bond Total Treasury Bond Treasury Bond PD REPO Adjustment Total (a)+(b)+(c) 3,477,187,767 9,579,943,175 4,252,816,238 2,073,394,832 19,383,342, ,620,107 22,121,994,546 2,872,192,146 8,554,134,029 3,916,984,148 1,947,332,484 17,290,642, ,148,202 19,266,487, (a) Consolidated Government securities AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 6.2 Other investments Shares Bond Investments ABBL, Mumbai Branch Treasury bills Debentures and Bonds Total Other investments 22,327,865,346 22,327,865,346 5,844,761, ,000,000 5,984,761, ,552,189 35,516, ,068,689 6,347,830,687 19,743,454,873 19,743,454,873 5,791,995, ,000,000 5,931,995, ,529,525 64,808, ,337,625 6,371,332,773 Annual Report

136 Notes to financial statements For the year ended 31 December (a) Consolidated other investments AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd Investments in shares Quoted (Publicly Traded) Unquoted Detailed are given in AnnexureB Investment in subordinated bonds Prime Bank Limited Trust Bank Limited 6.3 Maturity grouping Repayable on demand upto 3 months over 3 months but below 1 year over 1 year but below 5 years over 5 years 6,347,830, ,286, ,743,904 24,571,230 7,289,432,157 4,546,755,153 1,298,006,845 5,844,761,998 90,000,000 50,000, ,000, ,620,107 1,496,146,238 6,004,105,500 6,582,170,904 14,365,653,285 28,675,696,033 6,371,332, ,381,828 67,495,079 26,932,725 7,206,142,406 4,988,920, ,074,967 5,791,995,148 90,000,000 50,000, ,000, ,148,201 6,318,747, ,522,750 4,049,530,324 14,620,838,750 26,114,787, Disclosure of uniform accounting procedures for REPO transactions under DOS circular no 06 dated 15 July 2010 is given below: a. (i) Disclosure regarding outstanding Repo as on 31 December: Counter party name Bangladesh Bank (Liquidity Support) The City Bank Ltd (Interbank REPO) Total Agreement Date 30 Dec Dec 2013 Reversal Date 01 Jan Jan 2014 Amount (1st leg cash consideration) 1,650,615,000 1,435,120,890 3,085,735,890 (ii) Disclosure regarding outstanding Reverse Repo as on 31 December: Counter party name None Agreement Date N/A Reversal Date N/A Amount (1st leg cash consideration) N/A b. Disclosure regarding overall transaction of Repo and Reverse repo: Securities sold under repo: i) with Bangladesh Bank ii) with other banks & FIS Securities purchased under reverse repo: i) from Bangladesh Bank ii) from other banks & FIS Minimum outstanding during the year NIL NIL Maximum outstanding during the year 4,959,685,000 3,294,942,816 NIL NIL Daily average outstanding during the year 2,220,138, ,192,247 NIL NIL Annual Report

137 Notes to financial statements For the year ended 31 December Loans, advances and lease/investments 7.1 Maturity grouping Repayable on demand upto 3 months over 3 months but below 1 year over 1 year but below 5 years over 5 years 7.2 Broad categorywise breakup In Bangladesh Loans Overdrafts Cash credits Outside Bangladesh: ABBL, Mumbai Branch Loans Overdrafts Cash credits 7.3 Product wise Loans and Advances Overdraft Cash Credit Time loan Term loan Bills under LC Trust Receipt Packing credit Loan against accepted bills Consumer Loan Staff Loan Bills Purchased & Discounted 7.4 Net loans, advances and lease/investments Gross loans and advances Less: Interest suspense Provision for loans and advances 7.5 Significant concentration Advances to industries Advances to customer groups Advances to allied concerns of Directors Advances to Chief Executive 7.6 Advances to customers for more than 10% of Bank's total capital Total capital of the Bank Number of clients Amount of outstanding advances Amount of classified advances Measures taken for recovery ,121,297,505 2,133,556,712 54,989,812,944 56,676,768,431 22,858,233,012 3,462,926, ,121,297, ,527,054,842 20,328,225, ,855,280, ,434,730 13,640,801 12,383, ,458, ,067,739,439 20,344,462,888 12,383,450 41,464,803,500 53,937,687, ,517,044 13,153,607, ,227,357 7,353,921,361 1,438,967, ,161,648 1,053,558, ,121,297, ,121,297,505 1,774,784,880 3,980,331,722 5,755,116, ,366,180,902 58,383,212,206 81,738,085, ,121,297,505 18,772,259, ,997,312,467 Not applicable ,065,758, ,758,643 43,158,153,209 25,841,675,479 28,885,806,271 7,404,307, ,065,701,388 88,019,786,261 17,025,203, ,044,989, ,279,676 4,057,448 47,458, ,795, ,373,785,000 17,029,369,806 47,458,232 29,840,866,073 42,415,222, ,489,781 10,900,089, ,262,490 2,616,131,651 1,315,619, ,274, ,973, ,065,758, ,065,758, ,992,653 2,318,340,874 3,198,333, ,867,425,396 42,209,112,384 63,856,646, ,065,758,923 17,181,413, ,671,931,246 Not applicable Annual Report

138 Notes to financial statements For the year ended 31 December Industrywise loans, advances and lease/investments Agriculture Large and medium scale industry Working capital Export Commercial lending Small and cottage industry Others 7.8 Geographical locationwise (division) distribution 2,803,250,230 30,111,835,287 27,645,068,600 1,329,836,620 35,030,324, ,415,950 42,574,566, ,121,297,505 2,614,202,720 22,162,114,632 19,566,085,368 1,415,926,793 35,492,934, ,913,125 24,333,581, ,065,758,923 In Bangladesh Urban Branches Dhaka Chittagong Khulna Sylhet Barisal Rajshahi Rangpur Rural Branches Dhaka Chittagong Khulna Sylhet Barisal Rajshahi Rangpur Outside Bangladesh ABBL, Mumbai Branch 7.9 Classification of loans, advances and lease/investments In Bangladesh Unclassified Standard Special Mention Account Classified SubStandard Doubtful Bad/Loss Outside BangladeshMumbai Branch Unclassified Loan Classified Loan 87,657,115,729 34,619,147,376 4,834,496,931 2,090,420, ,231,607 3,588,080,320 2,652,948, ,822,440,864 3,069,394, ,593,289 78,373,582 3,594,361, ,495, ,121,297, ,277,476, ,457, ,779,934, ,254, ,605,000 3,747,009,000 4,636,868, ,416,802, ,442,443 83,052, ,495, ,121,297,505 69,932,442,327 21,340,455,537 4,176,544,481 1,909,055, ,361,172 2,643,457,653 2,209,016, ,530,334,034 2,518,022, ,998,917 74,568,972 2,954,590, ,834, ,065,758, ,542,166, ,004, ,047,170, ,063, ,890,000 2,475,800,546 3,437,753, ,484,924, ,321,614 84,512, ,834, ,065,758,923 Annual Report

139 Notes to financial statements For the year ended 31 December Particulars of Loans, advances and lease/investments (i) Loans considered good in respect of which the Bank is fully secured (ii) Loans considered good against which the Bank holds no security other than the debtors personal guarantee (iii) Loans considered good and secured by the personal undertaking of one or more parties in addition to the personal guarantee of the debtors (iv) Loans adversely classified but provision not maintained there against 136,108,015,393 4,013,282, ,121,297, ,004,645,135 2,061,113, ,065,758,923 (v) Loans due by directors or officers of the Bank or any of them either separately or jointly with any other persons [note 7.10 (a)] (vi) Loans due from companies or firms in which the directors of the Bank are interested as directors, partners or managing agents or, in case of private companies, as members (vii) Maximum total amount of advances, including temporary advances made at any time during the year to directors or managers or officers of the Bank or any of them either separately or jointly with any other persons [note 7.10 (a)] (viii) Maximum total amount of advances, including temporary advances granted during the year to the companies or firms in which the directors of the Bank are interested as directors, partners or managing agents or, in the case of private companies, as members (ix) Due from other banking companies (x) Amount of classified loans on which interest has not been charged (a) Increase/(decrease) of provision (specific) (b) Amount of loan written off (c) Amount realised against loan previously written off (d) Provision kept against loans classified as bad /loss on the date of preparing the balance sheet (e) Interest charged to interest suspense account (xi) Written off loan During the year Cumulative todate (as per Bangladesh Bank guidelines) Cumulative todate (in amicable settlement) The amount of written off loans for which lawsuits have been filed for its recovery 642,414, ,075,360 1,228,725,000 4,151,397 2,272,906, ,080,962 5,464,993,000 2,677,402,985 2,677,402, ,274, ,274, ,327, ,500,000 35,168,196 1,048,706, ,576, ,500,000 5,464,993,000 2,703,300,000 2,703,300, (a) The amount represents loans Tk. 642,414,253 due by the employees of the Bank Securities wise Loans, advances and lease/investments Nature of security Collateral of movable/immovable assets Cash collateral Banks and financial institutions guarantee Personal guarantee Corporate guarantee Other securities 107,514,203,681 2,978,767, ,912,409 7,209,910, ,386,889 21,237,116, ,121,297,505 80,184,533,296 5,576,928, ,117,246 5,873,289,218 9,875,872,087 3,897,018, ,065,758,923 Annual Report

140 Notes to financial statements For the year ended 31 December (a) Consolidated Loans, advances and lease/investments AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Inter company transaction 8. Bills purchased and discounted 139,067,739,439 7,136,710,118 1,042,520, ,246,969,973 2,701,326, ,545,643, ,373,785,000 7,585,189,288 1,073,788, ,032,762,482 2,721,036, ,311,725,962 In Bangladesh Outside Bangladesh ABBL, Mumbai Branch 8.1 Maturity grouping 561,521, ,036,384 1,053,558, ,934, ,039, ,973,923 Repayable within 1 month over 1 month but within 3 months over 3 months but within 6 months over 6 months 8 (a) Consolidated Bills purchased and discounted 422,367, ,588,875 24,601,820 1,053,558, ,394, ,579, ,973,923 AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 9. Fixed assets including premises, furniture and fixtures 1,053,558,066 1,529,678,739 2,583,236, ,973,923 1,659,285,813 2,351,259,736 Cost: Land and Building Furniture and fixtures Office appliances Electrical appliances Motor vehicles Intangible Assets Less: Accumulated depreciation and amortization A schedule of fixed assets is given in AnnexC 3,263,321, ,265,735 61,255,451 1,411,987, ,488, ,255,099 5,675,573,357 1,503,008,990 4,172,564,367 3,111,940, ,789,081 61,663,735 1,353,846, ,583, ,879,331 5,428,702,146 1,199,181,586 4,229,520,560 Annual Report

141 Notes to financial statements For the year ended 31 December (a) Consolidated Fixed assets including premises, furniture and fixtures Cost: AB Investments Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Accumulated depreciation: AB Investments Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 10. Other assets Income generatingequity Investment In Bangladesh: AB Investment Limited (99.99% owned subsidiary company of ABBL) AB Securities Limited (99.71% owned subsidiary company of ABBL) Cashlink Bangladesh Limited (CBL) (90% owned subsidiary company of ABBL) Outside Bangladesh: AB International Finance Ltd., Hong Kong (wholly owned subsidiary company of ABBL) AB Exchange (UK) Limited (wholly owned subsidiary company of ABBL) Nonincome generating Interbranch adjustment Advance corporate income tax (note: 10.1) Arab Bangladesh Bank Foundation (99.60% owned subsidiary company of ABBL) Share Money Deposits AB Investment Limited Share Money Deposits AB Securities Limited Accounts receivable Preliminary, formation, organisational, renovation, development, prepaid expenses and others Exchange for clearing Interest accrued on investment but not collected, and debentures, and other income receivables Security deposits Advance rent and advertisement Stationery, stamps, printing materials, etc. 5,675,573, ,374,720 9,082,746 28,819, ,270,883 15,592,870 6,553,714,247 1,503,008,990 35,242,257 8,783,455 16,482, ,907,170 8,492,456 1,811,917,292 4,741,796,955 99,899,000 34,898, ,581,228 5,203,944 38,425, ,007,792 1,839,710 7,060,657,451 19,920,000 4,900,100, ,000, ,469, ,594, ,479, ,821, ,257, ,568,488 29,375,102 15,055,083,229 15,446,091,023 5,428,702, ,076,609 9,273,255 28,777, ,419,630 15,837,740 6,322,086,549 1,199,181,586 19,128,664 8,770,016 11,193, ,896,835 5,265,911 1,453,436,647 4,868,649,902 99,899,000 34,898, ,581,228 5,203,944 32,280, ,862,172 4,191,700 5,673,148,042 19,920,000 4,900,100, ,000,000 1,232,257,570 1,033,615, ,078, ,226, ,435, ,275,414 34,546,476 14,875,793,996 15,260,656,171 Annual Report

142 Notes to financial statements For the year ended 31 December (a) Consolidated other assets AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Intergroup transaction 10.1 Advance corporate income tax In Bangladesh: Balance at 01 January 2013 Add: Paid during the year Tax withheld during the year Less: Transfer/Adjustment during the year Balance at 31 December 2013 Advance tax paid by ABBL, Mumbai Branch 11. Borrowings from other banks, financial institutions and agents In Bangladesh (Note: 11.1) Outside Bangladesh (Note: 11.2) 11.1 In Bangladesh Bangladesh Bank refinance ADB loan Islamic Investment Bonds Bangladesh Bank Refinance Call & Term Borrowing from Basic Bank Ltd. Rupali Bank Ltd. Dutch Bangla Bank Ltd. Dhaka Bank Ltd. National Bank Ltd. ICB Islami Bank Ltd. Accrued interest 11.2 Outside Bangladesh 15,446,091, ,820,752 7,060, ,033,578 36,866,958 1,346,818 16,055,219,650 6,132,152,038 9,923,067,613 5,514,493,945 1,187,716, ,255,192 1,410,971, ,799 6,925,302, ,354,788 7,060,657,451 4,230,695,016 5,756,797,017 9,987,492,033 42,893,375 1,810,228, ,305,002 2,015,427, ,000, ,000, ,000, ,000, ,000,000 15,267,726 2,215,267,726 4,230,695,016 15,260,656, ,544,527 9,249, ,900,318 23,287,654 1,350,208 15,637,988,302 6,370,150,451 9,267,837,853 4,066,825,904 1,325,524, ,143,930 1,447,668,041 5,514,493, ,654,097 5,673,148,042 3,262,748, ,513,441 3,649,261,782 28,799,000 3,000,800, ,541,281 3,210,140,281 50,000,000 2,608,060 52,608,060 3,262,748,341 Sonali Bank UK HSBC BK NY SCB,NY,USA International Finance Corporation Sonali Bank Uk National Bank Limited United Commercial Bank Ltd Dutch Bangla Bank Ltd. Annual Report ,750,000 36,369, ,710,388 2,721,250, ,717, ,750, ,500, ,750,000 5,756,797, ,513, ,513,441 A Schedule of Borrowings from other banks, financial institutions and agents outside Bangladesh is given in AnnexD.

143 Notes to financial statements For the year ended 31 December Analysis by security Secured (assets pledge as security for liabilities) Unsecured 11.4 Repayment pattern Repayable on demand Repayable on maturity (Note: ) Repayable on maturity 9,987,492,033 9,987,492,033 5,035,547,017 4,951,945,016 9,987,492,032 3,649,261,782 3,649,261, ,513,441 3,262,748,341 3,649,261,782 Bangladesh Bank refinance: ADB loan SME, Women Entrepreneur, Solar Energy, BioGas & ETP Term borrowings: Islamic Investment Bonds National Bank Limited International Finance Corporation Accrued interest 11(a) Consolidated Borrowings from other banks, financial institutions and agents AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Intercompany transactions 12. Deposit and other accounts 42,893, ,305, ,198,377 1,810,228, ,000,000 2,721,250,000 15,267,726 4,746,746,638 4,951,945,016 9,987,492,033 2,454,862,230 1,259,280, ,613, ,241,029 14,269,489,397 3,878,170,154 10,391,319,243 28,799, ,149, ,948,341 3,000,800,000 3,000,800,000 3,262,748,341 3,649,261,782 2,565,203,769 1,455,596, ,970, ,241,029 8,261,273,858 4,144,291,698 4,116,982,161 12(a) Interbank deposits Other deposits Consolidated Deposit and other accounts 4,030,274, ,816,001, ,846,275,315 3,429,038, ,596,915, ,025,953,891 AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Intergroup transaction 161,846,275,315 5,086, ,851,361, ,469, ,609,892, ,025,953, ,025,953, ,910, ,908,043,708 Annual Report

144 Notes to financial statements For the year ended 31 December Maturity analysis of interbank deposits Repayable on demand within 1 month over 1 month but within 3 months over 3 months but within 1 year over 1 year but within 5 years over 5 years but within 10 years over 10 years 12.2 Maturity analysis of other deposits Repayable on demand within 1 month over 1 month but within 3 months over 3 months but within 1 year over 1 year but within 5 years over 5 years 12.3 Demand and time deposits a) Demand Deposits Current accounts and other accounts Savings Deposits (9%) Bills Payable b) Time Deposits Savings Deposits (91%) Short Notice Deposits Fixed Deposits Other Deposits Total Demand and Time Deposits 12.4 Sectorwise break up of deposits and other accounts Government Deposit money Banks Autonomous & SemiAutonomous Bodies Public NonFinancial Organisation Other Public Foreign Currency Private 13. Other liabilities Accumulated provision against loans and advances (Note 13.1) Provision for current tax (Note 13.2) Deferred tax liabilities (Note 13.3) Interest suspense account (Note 13.4) Provision against other assets (Note 13.5) Provision for outstanding debit entries in NOSTRO accounts Accounts payable Bangladesh Bank Accrued expenses Provision for off balance sheet items (Note 13.6) Provision against investments (Note 13.7) Others (*) 337,310,488 2,343,721,850 1,011,931, ,310,488 4,030,274,291 1,935,942,496 19,437,674,463 33,776,922,098 67,025,189,928 34,252,352,458 1,387,919, ,816,001,023 18,420,611,485 15,742,024,927 1,538,411,402 1,140,175, ,425,663,830 15,555,048,620 22,968,769,304 91,742,137,914 13,159,707, ,846,275, ,073,000 4,030,274,291 3,027,972,099 22,900,850,230 1,013,434,469 3,306,827, ,109,843, ,846,275,315 3,980,331,722 9,650,912, ,050,939 1,774,784, ,234, ,000 47,656,432 38,724, ,000,000 1,995,053, ,779,169 19,231,727, ,935,907 2,204,358, ,807, ,935,907 3,429,038,351 2,026,259,201 21,291,051,239 45,049,083,405 46,346,615,500 19,739,825,047 2,144,081, ,596,915,541 16,292,283,489 13,487,687,930 1,337,448,548 1,467,147, ,733,670,403 13,523,090,879 21,160,436,286 80,452,713,916 8,597,429, ,025,953, ,114,413 3,429,038,351 1,806,458,373 18,865,880,199 1,097,727,074 3,221,036, ,169,698, ,025,953,891 2,318,340,874 7,772,599, ,104, ,992, ,197, ,000 66,308,878 62,205, ,000,000 1,597,153, ,305,337 14,133,406,241 (*) Others includes provision for audit fee, excise duty, income tax and VAT deducted at source, unclaimed dividend, accounts payable for safe keeping, earnest and security money, etc. Annual Report

145 Notes to financial statements For the year ended 31 December Accumulated provision against loans and advances The movement in specific provision for bad and doubtful debts Balance at 01 January Fully provided debts written off during the year () Recovery of amounts previously written off (+) Specific provision made for the year (+) Transferred from other assets provisions (+) Transfer from general provision (+) Recoveries and provision no longer required () Net charge to Profit and Loss Account (+) Balance at 31 December Provision made by ABBL, Mumbai Branch Total provision on classified loans and advances On unclassified loans Balance at 01 January Recoveries and provision no longer required () Transfer to specific provision during the year () General provision made for the year (+) Balance at 31 December Provision made by ABBL, Mumbai Branch Total provision on unclassified loans and advances Total provision on loans and advances 1,015,379,159 1,228,725,000 1,228,725,000 2,244,104,159 28,802,250 2,272,906,409 1,265,260, ,400, ,400,000 1,703,660,313 3,765,000 1,707,425,313 3,980,331,722 1,030,514, ,135, ,800,000 60,000,000 13,200,000 (15,135,291) 1,015,379,159 33,327,401 1,048,706,560 1,278,460,313 13,200,000 (13,200,000) 1,265,260,313 4,374,000 1,269,634,313 2,318,340,873 Provision for Required Maintained 2013 Excess Unclassified loans and advances Classified loans and advances 1,348,107,622 2,272,859,250 3,620,966,872 1,707,425,313 2,272,906,409 3,980,331, ,317,691 47, ,364, Details of provision for loans and advances Provision for 2013 Required Maintained General Provision : Standard Special Mention Account Specific Provision: Substandard Doubtful Bad/Loss Excess provision maintained at 31 December ,348,107,622 1,338,711,622 9,396,000 2,272,859,250 51,384, ,127,000 2,003,348,000 1,707,425,313 1,698,029,313 9,396,000 2,272,906,409 51,384, ,127,000 2,003,395, ,364, Provision for current tax Balance at 01 January Add: Provision made during the year Less: Adjustment during the year Balance at 31 December Provision held by ABBL, Mumbai Branch ,618,313,733 1,901,210,052 9,519,523, ,388,460 9,650,912, ,981,196,923 1,637,116,810 7,618,313, ,356,750 7,770,670,483 Corporate income tax assessment of the Bank is completed up to the income year ended 31 December 2008 (assessment year ). Corporate income tax assessment for income years 2009, 2010, 2011 and 2012 are under process. Tax assessments for income years 1995, 1996 and 1997 were completed but these were referred to the Hon'ble High Court on the application made by the Bank for some disputed points. Annual Report

146 Notes to financial statements For the year ended 31 December Deferred tax liabilities Balance at 01 January Add/(less): Provision made during the year Add/(Less): Adjustment/Rate Fluctuation during the year Balance at 31 December 13.4 Interest suspense account Balance at 01 January Transfer during the year (+) Recovery during the year () Write off during the year () Balance at 31 December Mumbai Branch 13.5 Provision against other assets Provision for 112,104,056 (2,807,775) (245,342) 109,050, ,286, ,080,962 80,741,571 1,751,626,029 23,158,851 1,774,784,880 68,532,913 43,456, , ,104, ,216, ,576,267 82,095, ,410, ,286,638 11,706, ,992,654 Prepaid legal expenses Protested bills London Representative Office Myanmar Representative Office Others 60,030,000 22,565,610 1,708,494 1,112, ,818, ,234,553 Provision against other assets was made as per BRPD Circular # 14 dated 25 June 2001 issued by Bangladesh Bank. 54,500,000 22,413,201 1,708,494 1,112, ,463, ,197, Calculation of Provision against other assets Outstanding amount Prepaid legal expenses 60,022,909 Protested bills 21,591,341 London Representative Office 1,708,494 Myanmar Representative Office 1,112,430 Others 180,698,400 Required provision for other assets Base for Provision 60,022,909 21,591,341 1,708,494 1,112, ,698,400 Rate 50% & 100% 100% 100% 100% 100% Provisions Requirement 30,849,532 21,591,341 1,708,494 1,112, ,698, ,960,198 Provisions Maintained 60,030,000 22,565,610 1,708,494 1,112, ,818, ,234,553 Total provision requirement Total provision maintained Excess provision maintained at 31 December ,960, ,234,553 56,274, Provision for off balance sheet items Balance at 01 January Add: Provision made during the period 580,000, ,000, ,000, ,000,000 70,000, ,000,000 Annual Report

147 Notes to financial statements For the year ended 31 December Particulars of required provision for OffBalance Sheet Items Acceptances and endorsements Letters of guarantee Irrevocable letters of credit Bills for collection Total Off Balance Sheet Items & required provision Total provision maintained Excess provision at 31 December 2013 No provision has been maintained against Off Balance Sheet items of Mumbai Branch amounting Tk. 2,222,623,900 as per Reserve Bank of India (RBI) guidelines Provision against investments Base for Provision 26,838,433,435 16,393,076,675 30,225,132,651 7,537,276,394 80,993,919,156 Rate (%) % 1% 1% 1% 268,384, ,930, ,251,327 75,372, ,939, ,000,000 60, ,950, ,823, ,633,980 73,145, ,553, ,000,000 4,446, Balance at 01 January Add: Provision made during the year Balance at 31 December 1,597,153, ,900,000 1,995,053,000 1,220,753, ,400,000 1,597,153,000 13(a) Consolidated Other liabilities AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Intergroup transaction 14. Share Capital 19,231,727, ,141,087 67,419, ,099,741 11,673,480 9,733,594 21,099,794, ,282,795 20,454,511,793 4,976,253,760 14,133,406, ,700,012 65,932, ,117,384 18,581,007 13,260,337 15,849,997, ,982,513 15,290,014,994 4,423,336, Authorised Capital 600,000,000 ordinary shares of 10 each 6,000,000,000 6,000,000, Issued, Subscribed and Paidup Capital 10,000,000 ordinary shares of 10 each issued for cash 5,000,000 ordinary shares of 10 each issued for rights 482,625,376 ordinary shares of 10 each issued as bonus shares 14.3 Percentage of shareholding 100,000,000 50,000,000 4,826,253,760 4,976,253, ,000,000 50,000,000 4,273,336,680 4,423,336,680 Particulars As at 31 December 2013 As at 31 December 2012 No. of shares % No. of shares % Sponsors and public Government 494,772,935 2,852, ,625, ,798,164 2,535, ,333, Annual Report

148 Notes to financial statements For the year ended 31 December Classification of shareholders by holding Upto to 5,000 5,001 to 10,000 10,001 to 20,000 20,001 to 30,000 30,001 to 40,000 40,001 to 50,000 50,001 to 100, ,001 to 1,000,000 Over 1,000,000 Holding No. of holders ,601 34,156 2,789 1, , ,751 33,187 2,420 1, ,307 % of total holding Names of the Directors and their shareholding as at 31 December 2013 Name of the Director Mr. M. Wahidul Haque Mr. Salim Ahmed Mr. Feroz Ahmed Mr. M. A. Awal Mr. Shishir Ranjan Bose FCA Mr. Faheemul Huq, Barrister at Law Mr. Syed Afzal Hasan Uddin, Barrister at Law Mr. Gholam Sarwar Mr. Md. Mesbahul Hoque Mr. Md. Anwar Jamil Siddiqui Mr. B. B. Saha Roy Dr. M. Imtiaz Hossain Mrs. Runa Zakia Shahrood Khan Mr. M. Fazlur Rahman 14.6 Capital Adequacy Ratio As per BASEL II Consolidated Capital Adequacy Ratio In terms of section 13 (2) of the Bank Company (Amendment) Act, 2013 and Bangladesh Bank BRPD Circular no. 35 dated 29 December 2010, required capital of the Bank on Consolidated basis at the close of business on 31 December 2013 is 17,639,604,417 as against available core capital of 15,804,597,371 and supplementary capital of 3,340,451,376 that is, a total of 19,145,048,748 thereby showing surplus capital/equity of 1,505,444,330 at that date. Details are shown below: Core capital (Tier I) Fully Paidup Capital/Capital Deposited with BB Statutory Reserve Nonrepayable share premium account General Reserve Retained earnings Minority interest in Subsidiaries NonCumulative irredeemable Preferences shares Dividend Equalization Account Deductions from Tier1 (Core Capital) Book value of Goodwill Shortfall in provisions required against classified assets Shortfall in provisions required against investment in shares Remaining deficit on account of revaluation of investments in securities after netting off from any other surplus on the securities. Reciprocal crossholdings of bank capital/subordinated debt Any investment exceeding the approved limit under section 26(2) of Bank Company (Amendment) Act, Investments in subsidiaries which are not consolidated Other if any Total Eligible TierI Capital Annual Report Status Chairman ViceChairman Director Director Independent Director Director Director Director Director Director Director Independent/Depositor Director Independent/Depositor Director President & Managing Director No of Shareholding As at 31 Dec ,662 11,754,084 10,325,069 3,118 2, ,964 2,214 11,933 2,214 2,214 1, ,976,253,760 5,564,799, ,018,431 5,171,126,214 (15,640,425) 15,814,557,372 9,960,000 9,960,000 15,804,597,372 As at 31 Dec ,700 10,448,076 9,177,840 2,772 1, ,524 1,968 10,608 1,968 1,968 1, ,423,336,680 5,005,314, ,093,432 5,261,734,530 (20,230,938) 14,790,248,506 9,960,000 9,960,000 14,780,288,506

149 Notes to financial statements For the year ended 31 December Supplementary capital (Tier II) General Provision for Unclassified Loans General Provision for off Balance Sheet exposure Assets Revaluation Reserves up to 50% Revaluation Reserves of Securities ( Up to 50%) Revaluation Reserve for equity instruments up to 10% All other preference shares Balance of Exchange Equalisation Fund Perpetual Subordinated debt SubTotal Deductions if any Total Eligible TierII Capital Capital eligible for market risk (TierIII) Shortterm subordinated debt A. Total Eligible Capital 1,801,166, ,000, ,425,705 72,819,310 3,350,411,376 9,960,000 3,340,451,376 19,145,048,748 1,363,375, ,000, ,588,060 8,423,262 2,649,386,682 9,960,000 2,639,426,682 17,419,715,188 Total assets including offbalance Sheet items Total riskweighted assets (RWA) B. Total required capital (10% of Total RWA) Capital Surplus / (Shortfall) [AB] Capital adequacy ratio 292,965,313, ,396,044,173 17,639,604,417 1,505,444, % 235,107,764, ,744,862,415 14,974,486,241 2,445,228, % Solo Capital Adequacy Ratio In terms of section 13(2) of the Bank Company (Amendment) Act, 2013 and Bangladesh Bank BRPD Circular no. 35 dated 29 December 2010, required capital of the Bank on Solo basis at the close of business on 31 December 2013 is 17,387,119,871 as against available core capital of 15,569,618,999 and supplementary capital of 3,202,640,347 that is, a total of 18,772,259,345 thereby showing surplus capital/equity of 1,385,139,474 at that date. Details are shown below: Core capital (Tier I) Fully Paidup Capital/Capital Deposited with BB Statutory Reserve Nonrepayable share premium account General Reserve Retained earnings Minority interest in Subsidiaries NonCumulative irredeemable Preferences shares Dividend Equalization Account Deductions from Tier1 (Core Capital): Book value of Goodwill Shortfall in provisions required against classified assets Shortfall in provisions required against investment in shares Remaining deficit on account of revaluation of investments in securities after netting off from any other surplus on the securities. Reciprocal crossholdings of bank capital/subordinated debt Any investment exceeding the approved limit under section 26(2) of Bank Company (Amendment) Act, Investments in subsidiaries which are not consolidated Other if any Total Eligible TierI Capital 4,976,253,760 5,564,799,391 42,199,200 4,986,366,647 15,569,618,999 15,569,618,999 4,423,336,680 5,005,314,801 42,199,200 5,158,900,828 14,629,751,509 14,629,751,509 Annual Report

150 Notes to financial statements For the year ended 31 December Supplementary capital (Tier II) General Provision for Unclassified loans General Provision for off Balance Sheet exposure Assets Revaluation Reserves up to 50% Revaluation Reserves of Securities ( Up to 50%) Revaluation Reserve for equity instruments up to 10% All other preference shares Balance of Exchange Equalisation Fund Perpetual Subordinated debt SubTotal Deductions if any Total Eligible TierII Capital Capital eligible for market risk (TierIII) Shortterm subordinated debt A. Total Eligible Capital Total assets including offbalance Sheet items Total riskweighted assets (RWA) B. Total required capital (10% of Total RWA) Capital Surplus / (Shortfall) [AB] Capital adequacy ratio Detailed Disclosure under Pillar III of Basel II is presented in (Annex E). 15. Statutory reserve In Bangladesh Opening balance Add: Addition during the year Outside Bangladesh ABBL, Mumbai Branch Opening balance Add: Transferred from retained earnings Add: Transferred from Investment fluctuation reserve Add/(Less): Adjustment for Foreign Exchange Rate Fluctuation 16. Other reserve General reserve (Note 16.1) Assets revaluation reserve (Note 16.2) Investment revaluation reserve (Note 16.3) Foreign exchange revaluation for investment in foreign operation 16.1 General reserve 16.2 Assets revaluation reserve Opening balance Less: Adjustment during the period 1,707,425, ,000, ,407,904 21,807,130 3,202,640,347 3,202,640,347 18,772,259, ,222,086, ,871,198,712 17,387,119,871 1,385,139, % 4,824,544, ,586,175 5,384,130, ,770,130 14,891,830 10,175,540 (25,168,955) 180,668,545 5,564,799,391 42,199,200 1,326,815,807 43,614,260 1,412,629,267 42,199,200 1,326,815,807 1,326,815,807 1,269,634, ,000, ,603,919 8,423,262 2,551,661,494 2,551,661,494 17,181,413, ,432,880, ,492,197,160 14,649,219,716 2,532,193, % 4,230,234, ,310,170 4,824,544, ,962,774 29,756,322 (8,948,966) 180,770,130 5,005,314,801 42,199,200 1,326,815,807 16,846,523 60,392,031 1,446,253,561 42,199,200 1,335,395,306 8,579,499 1,326,815,807 Annual Report

151 Notes to financial statements For the year ended 31 December Investment revaluation reserve (Treasury Bills & Treasury Bonds) In Bangladesh Revaluation Reserve for: Held to Maturity (HTM) Held for Trading (HFT) 2,589,612 41,024,648 43,614,260 1,235,476 3,789,583 5,025,059 Outside Bangladesh ABBL, Mumbai Branch Revaluation Reserve for Held to Maturity (HTM) 43,614,260 11,821,464 16,846,523 Opening balance Add: Addition during the year Revaluation Reserve for Held for Trading (HFT) 1,235,476 1,354,136 2,589,612 1,235,476 1,235,476 Opening balance Add: Addition during the year 3,789,583 37,235,065 41,024,648 2,813, ,376 3,789,583 Revaluation reserve of HTM and HFT securities transferred to Revaluation Reserve Account as per Bangladesh Bank DOS Circular No. 05 dated 26 May 2008 of which 50% of revaluation reserve is treated as Supplementary Capital. 16 (a) Consolidated other reserve AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 17. Retained earnings 1,412,629,267 81,854, ,024,360 1,596,508,461 1,446,253,561 85,862,514 1,532,116,076 Opening balance Add: Posttax profit for the year Less: Transfer to statutory reserve Cash dividend Bonus shares issued Add/(Less): Retained earnings adjustment of Mumbai Br. Add: Foreign Exchange Translation gain/(loss) 5,158,900,828 1,010,997, ,478, ,917,080 5,042,503,057 (56,136,410) 4,986,366,647 5,291,115,537 1,438,537, ,066, ,305, ,222,780 5,184,058,384 (1,384,954) (23,772,601) 5,158,900,828 Annual Report

152 Notes to financial statements For the year ended 31 December (a) Consolidated Retained earnings AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Inter group transaction/share discounting Minority Interest 17(b) Minority Interest 4,986,366, ,414, ,802, ,935,908 (442,254,774) (35,353,595) 5,240,911, ,529,860 (43,744,425) 5,171,126,214 5,158,900, ,771, ,646, ,980,372 (489,608,852) (29,221,119) 5,606,469, ,069,411 (48,334,938) 5,261,734,530 AB Investment Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) 5, ,554 (16,225,477) (15,640,425) 11, ,999 (20,960,885) (20,230,938) 18. Contingent liabilities 83,216,543,057 59,590,452, Letters of guarantee Money for which the Bank is in contingently liable in respect of guarantees issued favoring: Directors Government Banks and other financial institutions Others 319,439,000 16,073,637,675 16,393,076, ,900,000 12,591,432,805 12,882,332,805 Annual Report

153 Notes to financial statements For the year ended 31 December Profit and loss account Income: Interest, discount and similar income Dividend income Fee, commission and brokerage Gains less losses arising from investment securities Gains less losses arising from dealing in foreign currencies Other operating income Gains less losses arising from dealing securities Income from nonbanking assets Profit less losses on interest rate changes Expenses: Interest, fee and commission Administrative expenses Other operating expenses Depreciation and amortization on banking assets Losses on loans and advances 20. Interest income/profit on investments Interest on loans and advances: Loans and advances Bills purchased and discounted Interest on: Calls and placements Balance with foreign banks Reverse Repo Balance with Bangladesh Bank 20(a). Consolidated Interest income/profit on investments AB International Finance Limited AB Investment Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Intercompany Transactions 21. Interest/profit paid on deposits, borrowings, etc. Interest on deposits: Fixed deposits Savings deposits Special notice deposits Other deposits Interest on borrowings: Local banks, financial institutions including Bangladesh Bank 20,421,030, ,264,167 2,157,327,618 90,570, ,190, ,557,511 79,721,345 23,928,662,318 14,173,526,482 3,139,460,036 1,006,285, ,731,935 18,639,003,968 5,289,658,349 16,788,672, ,424,260 17,248,096, ,687,073 15,581, , ,952,046 17,953,048,673 17,953,048, ,723, ,099,614 95,771,014 18,651,642, ,641,116 18,365,001,635 10,057,873, ,280,022 1,580,605,285 1,239,321,458 13,549,080, ,446,310 14,173,526,482 17,881,807, ,296,844 1,679,196, ,271, ,073, ,035,990 (237,907) 21,026,445,063 12,591,500,175 2,927,801, ,307, ,808,246 16,663,416,952 4,363,028,111 14,491,001, ,580,541 14,871,582, ,465,454 12,374,158 1,554,267 1,030, ,424,426 15,714,006,609 15,714,006,609 90,780, ,780, ,740,823 20,522,424 16,811,830, ,265,965 16,497,564,598 9,023,336, ,053,469 1,095,574, ,812,854 11,511,777,463 1,079,722,712 12,591,500,175 Annual Report

154 Notes to financial statements For the year ended 31 December (a). Consolidated Interest/profit paid on deposits, borrowings, etc. AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Intercompany Transactions 22. Investment income Capital gain on sale of shares Interest on treasury bills Dividend on shares Interest on debentures Interest on treasury bonds Gain/(Loss) on treasury bills and treasury bonds Interest on other bonds & others 22(a). Consolidated Investment income AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Intercompany Transactions (*) 14,173,526, ,363,880 14,641,669 73,113,588 14,570,645, ,568,769 14,281,076,850 90,570, ,376, ,264,167 2,887,500 1,881,378,565 79,721,345 29,339,877 2,841,538,159 2,841,538,159 (11,408,937) 76,744 2,830,205, ,148,632 2,715,057,334 12,591,500, ,200,049 11,254,830 76,242, ,907 13,001,492, ,560,873 12,686,931, ,271, ,761, ,296,844 2,887,500 1,933,183,660 (237,907) 19,969,166 2,714,131,615 2,714,131,615 9,723, ,906 (3,341,969) 2,720,871, ,688,183 2,326,182,892 (*) Intercompany transactions includes dividend income from AB Investment Limited, AB Securities Limited and AB International Finance Limited. 23. Commission, exchange and brokerage Other fees, commission and service charges Commission on letters of credit Commission on letters of guarantee Exchange gains less losses arising from dealings in foreign currencies 23(a). Consolidated Commission, exchange and brokerage AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Intercompany Transactions 1,080,561, ,454, ,310, ,190,356 3,020,517,974 3,020,517,974 37,385,863 43,523,416 51,560, ,208,938 5,775,138 3,263,971, ,368,410 3,159,603, ,205, ,048, ,943, ,073,910 2,461,270,850 2,461,270, ,732,776 29,603,255 63,805,577 17,300,450 2,988,433 2,702,701,341 12,746,308 2,689,955,033 Annual Report

155 Notes to financial statements For the year ended 31 December Other income Locker rent, insurance claim and others Recoveries on loans previously written off Recoveries on telex, telephone, fax, etc. Recoveries on courier, postage, stamp, etc. Gain on sale of Bank property Nonoperating income (*) (*) Nonoperating income includes sale of old fixed assets and scrap items etc. 6,708,965 4,151,397 79,557,329 22,603, , ,557,511 6,219,049 35,168,196 63,522,869 20,032,872 10,803,848 1,289, ,035,990 24(a). Consolidated other income AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Inter company transactions 25. Salary and allowances Basic salary, provident fund contribution and all other allowances Festival and incentive bonus 25(a). Consolidated salary and allowances AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 26. Rent, taxes, insurance, electricity, etc. Rent, rates and taxes Electricity, gas, water, etc. Insurance 26(a). Consolidated Rent, taxes, insurance, electricity, etc. AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Inter company transactions 113,557,511 8,310,421 45,946,982 2,431,472 1,187, ,433,738 8,227, ,206,015 1,883,846, ,748,055 2,081,594,761 2,081,594,761 14,054,087 24,196,617 22,499,392 98,930 4,312,640 2,146,756, ,876,101 78,624, ,984, ,485, ,485,269 1,637,363 6,283,396 7,688,089 1,530,844 2,279, ,904,058 5,300, ,603, ,035,990 7,609,863 49,681,915 1,946,917 25,969, ,244,200 30,568, ,675,408 1,665,459, ,684,694 1,868,144,551 1,868,144,551 15,773,047 23,725,543 22,480,470 14,508,748 6,554,757 1,951,187, ,081,050 71,544,669 87,906, ,531, ,531,774 3,054,881 6,196,402 7,275,468 5,352,716 3,183, ,595,166 4,735, ,860,032 Annual Report

156 Notes to financial statements For the year ended 31 December Legal expenses Legal expenses 13,260,716 10,107,729 27(a). Consolidated Legal expenses AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 28. Postage, stamp, telecommunication, etc. Telex, fax, internet, wireless link, SWIFT, etc. Telephone Postage, stamp and shipping 28(a). Consolidated Postage, stamp, telecommunication, etc. AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Inter company transactions 13,260, , ,074 5, ,250 43,929 14,043,869 97,630,806 12,247,740 29,590, ,468, ,468, ,371 7,150,061 1,563, , , ,845,399 17,382, ,462,923 10,107, , , ,157 11,086, ,971,673 12,222,858 25,134, ,329, ,329, ,475 7,046,147 1,482, , , ,912,887 12,746, ,166, Stationery, printing, advertisements, etc. Printing and stationery Publicity, advertisement, etc. 29(a). Consolidated Stationery, printing, advertisements, etc. AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 30. Directors' fees Directors' fees Meeting expenses 133,387,162 31,293, ,680, ,680, , , ,215 13,210 24, ,314,652 1,741, ,643 2,513, ,426,648 39,987, ,413, ,413, , , , ,410 15, ,109,048 1,950, ,807 2,840,207 Directors' fees includes fees for attending the meeting of the Board, Executive Committee, Audit Committee and Shariah Council. Each director was Tk.5,000 per meeting. Annual Report

157 Notes to financial statements For the year ended 31 December (a). Consolidated Directors' fees AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 31. Auditors' fees Statutory Others 31(a). Consolidated Auditors' fees AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 32. Depreciation and repairs of Bank's assets 2,513, , ,000 45,000 3,058,243 1,098,535 1,356,793 2,455,328 2,455, , , , , ,646 3,404,536 2,840,207 92, ,500 38,500 3,189,207 1,493,095 3,424,403 4,917,497 4,917, , ,231 62,500 80, ,487 6,031,215 Depreciation : Electrical appliances Furniture and fixtures Office appliances Building Motor vehicles Repairs: Motor vehicles Electrical appliances Office premises and others Furniture and fixtures Office appliances Amortization of Intangible Assets 32(a). Consolidated Depreciation and repairs of Bank's assets AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 177,828,306 13,660,189 2,724,234 15,154,566 52,237, ,605,041 19,890, ,947, ,839,751 1,874,633 5,014, ,566, ,171,400 58,126, ,298, ,298,293 16,443, ,515 6,004,616 48,196,260 3,226, ,702, ,365,503 13,076,153 3,460,627 15,037,701 68,033, ,973,197 17,396, ,034, ,660,695 1,109,569 3,631, ,832, ,805,717 42,835, ,640, ,640,766 16,264, ,675 6,053,015 54,958,719 3,448, ,884,807 Annual Report

158 Notes to financial statements For the year ended 31 December Other expenses Contractual service Petrol, oil and lubricant Software expenses Entertainment Travelling Subscription, membership and sponsorship Training, seminar and workshop Local conveyance Professional charges Books, newspapers and periodicals Branch opening expenses Bank Charges Sundry expenses (*) 370,967,057 68,457, ,650,199 64,075,098 48,957,476 22,476,543 11,191,287 10,585,643 47,355,803 1,290,580 77,529 30,123, ,076,572 1,006,285, ,611,022 64,945,348 72,787,297 63,786,226 38,774,334 26,235,643 8,773,550 8,217,635 50,975,339 1,272, ,036 7,507, ,084, ,307,326 (*) Sundry expenses includes business promotion, donation, annual general meeting, rebate to foreign correspondents, etc. 33(a). Consolidated other expenses AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. Less: Inter company transactions 34. Provision against loans and advances On unclassified loans On classified loans 34(a). Consolidated provision against loans and advances AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 35. Provisions for diminution in value of investments In quoted shares 35(a). Consolidated provisions for diminution in value of investments AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 1,006,285,515 13,166,926 3,847,582 21,376,481 7,967,322 1,369,677 1,054,013,503 86,985, ,027, ,400,000 1,228,725,000 1,667,125,000 1,667,125,000 1,667,125, ,900, ,900,000 65,922, , ,446, ,307,326 12,200,791 3,974,970 11,951,068 36,854,257 1,419, ,707,970 25,833, ,874, , ,800, ,182, ,182, ,182, ,400, ,400,000 38,161,624 12,003, ,565,410 Annual Report

159 Notes to financial statements For the year ended 31 December Other provision Provision for off balance sheet items Provision for Other assets 230,000,000 10,000, ,000,000 70,000,000 14,160,000 84,160,000 Provision for prepaid legal expenses and protested bills has been made as per Bangladesh Bank BRPD Circular # 14 dated 25 June (a). Consolidated other provisions AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) AB Exchange (UK) Ltd. 37. Appropriations Retained earnings brought forward Less: Adjustment for prior year Add: Posttax profit for the year Less: Dividend Cash dividend Bonus shares issued Transferred to: Statutory reserve General reserve Proposed dividend Retained earnings Less: Adjustment during the year Add: Foreign Exchange translation gain/(loss) 38. Earnings Per Share (EPS) Profit after taxation Number of ordinary shares outstanding Earnings Per Share 240,000, , ,149,814 5,158,900,829 1,010,997,314 6,169,898, ,917,080 5,616,981, ,478, ,478,006 5,042,503,057 (56,136,410) 4,986,366,648 1,010,997, ,625, ,160, ,875 84,356,875 5,291,115,538 1,438,537,813 6,729,653, ,305, ,222,780 5,808,124, ,066, ,066,492 5,184,058,384 (1,384,954) (23,772,601) 5,158,900,829 1,438,537, ,625, (a) Consolidated Earnings Per Share Net Profit attributable to the shareholders of parent company Number of ordinary shares outstanding Earnings Per Share 1,093,697, ,625, ,466,950, ,625, Earnings Per Share (EPS) has been computed by dividing the basic earnings by the number of ordinary shares outstanding as of 31 December 2013 in terms of Bangladesh Accounting Standard (BAS)33. According to BAS33, EPS for the year ended 31 December 2012 was restated for the issues of bonus share in Annual Report

160 Notes to financial statements For the year ended 31 December Receipts from other operating activities Interest on treasury bills, bonds, debenture and others Exchange earnings Recoveries on telex, telephone, fax, etc. Recoveries on courier, postage, stamp, etc. Gain on sale of Bank properties Nonoperating income Others 39(a). Consolidated Receipts from other operating activities 2,638,273, ,190,356 79,557,329 22,603, ,441 6,708,965 3,610,870,462 2,285,834, ,073,910 63,522,869 20,032,872 10,803,848 1,289,155 6,219,049 3,169,776,474 AB Investment Limited AB International Finance Limited AB Securities Limited Cashlink Bangladesh Limited (CBL) 40. Payments for other operating activities 3,610,870,462 (3,098,516) 45,946,982 2,508,216 1,187,352 3,657,414,496 3,169,776,474 32,766,651 3,202,543,124 Rent, taxes, insurance, electricity, etc. Postage, stamps, telecommunication, etc. Repairs of Bank's assets Legal expenses Auditor's fees Directors' fees Other Expenses 41. Decrease in other assets 467,485, ,468, ,566,358 13,260,716 2,455,328 2,513,743 1,029,766,244 1,911,516, ,531, ,037,732 62,710,969 10,107,729 4,917,497 2,840,207 1,092,645,976 1,721,791,885 Investment in Subsidiaries Advance rent and advertisement Stationery, stamps, printing materials, etc. Security deposits Interest accrued on investment but not collected, commission and brokerage receivable on shares and debentures, and other income receivables Accounts receivable Preliminary, formation, organizational, renovation, development and prepaid expenses Exchange for clearing Arab Bangladesh Bank Foundation Interbranch adjustment 5,456,107, ,568,488 29,375, ,257, ,821, ,469, ,594, ,479,645 19,920,000 1,839,710 8,385,433,570 5,449,962, ,275,414 34,546, ,435, ,226,038 1,232,257,570 1,033,615, ,078,129 19,920,000 4,191,700 9,587,508,127 Net Decrease 1,202,074, ,680,945 Annual Report

161 Notes to financial statements For the year ended 31 December Increase/(decrease) in other liabilities Accumulated provision against loans and advances Provision for current tax Deferred tax liabilities Interest suspense account Accounts payable Bangladesh Bank Provision against other assets Accrued expenses Provision against investments Provision against off balance sheet items Accrued profit on investment Islami banking branch Provision for outstanding debit entries in NOSTRO accounts Others Less: Adjustment for provision & Others Net Increase/(Decrease) 3,980,331,722 9,650,912, ,050,939 1,774,784,880 47,656, ,234,553 38,724,384 1,995,053, ,000, , ,779,169 19,231,727,325 17,119,762,295 2,111,965, ,322,731 2,318,340,874 7,772,599, ,104, ,992,653 66,308, ,197,228 62,205,113 1,597,153, ,000, , ,305,337 14,133,406,241 12,866,763,943 1,266,642,298 (364,695,728) 43. Conversion Rates Assets and liabilities as at 31 December 2013 denominated in foreign currencies have been converted to local currency Bangladesh (BDT) at the following exchange rates: Currency Abbreviation Unit Equivalent to BDT British Pound Sterling GBP European Currency EURO Indian Rupee INR Japanese Yen JPY US Dollar USD Honkong Dollar HKD U.A.E Dirham DIRHAM Annual Report

162 Notes to financial statements For the year ended 31 December Highlights of the overall activities of the Bank Sl # Particulars Paidup capital Total capital Capital surplus Total assets Total deposits Total loans and advances Total contingent liabilities and commitments Creditdeposit ratio Ratio of classified loans against total loans and advances Profit after tax and provision Loans Classified during the Year Provision kept against classified loans Provision surplus/ (deficit) Cost of fund Interest earning assets Noninterest earning assets Return on investments (ROI) Return on assets (ROA) Income from investments Earnings per share Net Income per share Priceearnings ratio (Times) ,976,253,760 18,772,259,345 1,385,139, ,005,543, ,846,275, ,121,297,505 83,216,543, % 1,010,997,314 1,199,114,300 2,272,906, ,364, % 175,977,549,246 32,027,994, % 0.53% 2,841,538, ,423,336,680 17,181,413,003 2,532,193, ,842,427, ,025,953, ,065,758,923 59,590,452, % 1,438,537,813 1,757,452,927 1,048,706, ,120, % 144,166,850,868 29,675,576, % 0.88% 2,714,131, Shamim Ahmed Chaudhury Managing Director Shishir Ranjan Bose, FCA Director Salim Ahmed Vice Chairman M. Wahidul Haque Chairman Dated, 12 March 2014 Annual Report

163 Currency wise Balances As at 31 December 2013 AnnexA Name of the bank Location Name of currency Amounts in foreign currency As at 31 December 2013 Conversion rate Equivalent amounts in The Bank of Tokyo Mitsubishi Ltd. Japan JPY 1,209, , HSBC Plc UK,London GBP 131, ,830, HSBC AUST Australia AUD 45, ,151, JP Morgan Chase Bank USA USD 1,820, ,546, Sonali Bank (Kolkata) India ACU 42, ,310, Sonali Bank (UK) UK,London USD 1,962, ,592, Sonali Bank (UK) UK,London GBP 115, ,735, Myanmar Economic Bank Myanmer ACU , Citibank NA USA USD 968, ,332, Hatton National Bank Ltd. Srilanka ACU 2, , Commerz Bank AG Germany USD 275, ,396, AB International Finance Ltd. Hong Kong USD 16,206, ,260,016,500 NIB Bank Ltd. Pakistan ACU 15, ,226, Mashreq Bank Psc USA USD 370, ,820, Nepal Bangladesh Bank Ltd. Nepal ACU 37, ,923, Bank of Bhutan Bhutan ACU 101, ,857, Habib UK UK,London GBP 10, ,280, Habib UK UK,London USD 123, ,563, Wachovia Bank/Wells Fargo N.A USA USD 502, ,081, Habib America Bank USA USD 409, ,814, Commerz Bank AG Germany EURO 253, ,109, Hypovereins Bank Germany EUR 47, ,081, National Commercial Bank Ltd KSA USD 366, ,511, Habib Metro Bank Pakistan ACU 373, ,036, Habib Bank AG Dubai AED 37, , COMMERZ BK CAD Germany CAD 87, ,343, COMMERZ BK CHF Germany CHF 151, ,222, JPMC NYOBU USA USD 12, , HSBC, New York USA USD 387, ,166, Reserve Bank of India Mumbai INR 13,242, ,619, HDFC BANK CSGL Mumbai INR 419, , HDFC Bank Ltd. Mumbai INR 18,143, ,770, Commerz Bank AG (Euro) Frankfurt EURO 57, ,175, HSBC (Euro) London EURO , HSBC ACU (Euro) London EURO 34, ,671, HSBC (GBP) London STG PND 9, ,157, HSBC (USD) Newyork USD 163, ,650, HSBC (ACUD) Newyork USD 5,170, ,048, Habib American Bank Ltd Newyork USD 95, ,402, Standard Chartered Bank Singapore SGD 8, , JP Morgan Chase Bank Newyork USD 882, ,447, Total 2,494,830,373 Annual Report

164 Investment in Shares As at 31 December 2013 AnnexB Particulars Shares (quoted) NBL Social Inv. Bank Ltd. Heidelberg Cement Lafarge Surma Cement AB Bank 1st MF LR Global Mutual Fund Popular Life 1st MF National Life Ins. Pragati Insurance Desco Khulna Power Navana CNG Ltd. Padma Oil Powergrid Com. Titas Gas Beacon Pharma Beximco Pharma Orion Pharma Fuwang Foods Ltd. BSRM Steel GPH Ispat Lanka Bangla Finance Union Capital Ltd. Beximco GP SP Ceramics Number of shares 1,000,000 1,651, , ,000 32,523,128 10,000,000 1,000, ,200 1,004,206 5,268,725 4,928, , ,000 3,366, ,125 6,642,500 5,892,306 1,200, ,300 3,886, ,500 1,175,500 1,554,000 2,659, ,800 1,143,962 Market price per share/ Total market price/ 11,800,000 21,964,950 47,587,500 6,700, ,409,583 73,000,000 6,000,000 56,789,200 54,026, ,693, ,987,435 26,586, ,843, ,751,200 7,389,225 87,681, ,116,843 70,440,000 13,506, ,968,200 49,740,800 78,170,750 53,768,400 85,622, ,450,320 20,934,505 2,552,929,395 Cost per Share Total cost/ 46,512,849 28,629,530 49,803,390 6,774, ,000, ,000,000 8,250,000 52,322, ,579, ,190, ,738,803 30,782, ,275, ,723,472 7,846, ,289, ,596, ,000,001 19,831, ,154,594 59,150,228 85,618, ,037, ,094, ,052,756 66,501,146 4,546,755,153 Shares/Bond (unquoted) Particulars Number of shares Cost per Share Book Value/ Cost/ CDBL CDBL (Placement) Fiber home Ltd. IIDFCL Apex Hotels Ltd. Amana Bank Limited, Srilanka Bangladesh Fund Stock Market Stablization Fund 5,000, , , ,765 28,070, ,562, ,000,000 5,694,430 50,000,000 10,576, ,999, ,735, ,000,000 5,000,000 1,298,006,845 Annual Report

165 Schedule of Fixed Assets including premises, furniture & fixtures As of 31 December 2013 Particulars Land and Building Furniture and Fixtures Office Appliances Cost Balance at 01 January ,111,940, ,789,081 61,663,735 Addition during the year 151,381,205 4,281,417 1,633,336 Less : Disposal/Adjustment during the year 1,353, ,984 Adjustment for INR Rate Fluctuation 451,245 1,458,636 At 31 December ,263,321, ,265,735 61,255,451 Accumulated Depreciation Balance at 01 January ,610,824 78,906,889 48,880,311 Addition during the year 15,154,566 13,660,189 2,724,235 Less : Disposal/Adjustment during the year 1,023, ,106 Adjustment for INR Rate Fluctuation 273,930 1,441,963 At 31 December ,765,390 91,270,006 49,607,477 Net Book Value: At 31 December ,188,556, ,995,729 11,647,974 At 31 December ,052,329, ,882,191 12,783,424 Electrical Appliances 1,353,846,742 73,253,523 7,781,059 7,331,862 1,411,987, ,458, ,828,308 6,327,124 5,762, ,196, ,790, ,388,351 Motor Vehicles 479,583,052 5,490, , ,488, ,360,370 52,237, , ,077, ,410, ,222,682 Intangible Assets 218,879,331 30,375, ,255,099 6,964,801 58,126,893 65,091, ,163, ,914,530 Annex C (Amount in ) Total 5,428,702, ,415,249 9,717,560 9,826,477 5,675,573,358 1,199,181, ,731,937 7,905,372 7,999,160 1,503,008,991 4,172,564,367 4,229,520,560 Annual Report

166 Borrowings from other banks, financial institutions and agentsoutside Bangladesh At 31 December 2013 At 31 December 2012 Name of the bank Location Currency Amounts in foreign currency Conversion rate Equivalent amounts in Amounts in foreign currency Conversion rate Sonali Bank UK UK USD 12,983, ,009,467,125 4,840, HSBC BK NY BK USD 467, ,369,504 SCB,NY,USA USA USD 1,591, ,710,388 International Finance USA USD 35,000, ,721,250,000 Corporation National Bank Limited Bangladesh USD 9,000, ,750,000 United Commercial Bank Ltd. Bangladesh USD 10,000, ,500,000 Dutch Bangla Bank Ltd. Bangladesh USD 5,000, ,750,000 5,756,797,017 AnnexD Equivalent amounts in 386,513, ,513,441 Annual Report

167 Detailed of Risk Weighted Assets under Basel II At 31 December 2013 Risk Weighted Assets (RWA) for Exposure AnnexE Amount in Risk Weighted Risk Weighted Exposure Asset Asset A. Credit Risk On Balance sheet (as shown below) OffBalance sheet (as shown below) B. Market Risk C. Operational Risk Total: RWA (A+B+C) 195,162,330,827 42,754,140, ,916,471, ,143,479,729 35,233,996,894 6,639,916,447 13,853,805, ,871,198, ,907,161,792 28,394,362, ,301,524, ,944,080,682 22,108,915,306 7,461,402,644 13,977,798, ,492,197,160 Credit Risk On Balance Sheet Sl. a) b) c) d) e) f) g) h) i) j) k) l) m) n) o) p) q) r) s) t) Exposure Type Cash and Cash Equivalents Claims on Bangladesh Government and Bangladesh Bank Claims on other Sovereigns & Central Banks* Claims on Bank for International Settlements, International Monetary Fund and European Central Bank Claims on Multilateral Development Banks (MDBs) Claims on Public Sector Entities (other than Government) in Bangladesh Claims on Banks and Nonbank Financial Institution (NBFI): i) Original maturity over 3 months ii) Maturity less than 3 months Claims on Corporate (excluding equity exposure) Claims under Credit Risk Mitigation Fixed Risk Weight Groups: Claims categorized as retail portfolio & Small Enterprise (excluding consumer loan) Consumer Loan Claims fully secured by residential property Claims fully secured by commercial real estate Past Due Claims (Risk weights are to be assigned net of specific provision) Investments in venture capital Claim on Capital Market Exposure Unlisted equity investments and regulatory capital instruments issued by other banks (other than those deducted from capital) held in banking book Investments in premises, plant and equipment and all other fixed assets Claims on all fixed assets under operating lease All other assets Total Exposure 1,329,240,204 26,124,616, ,552, ,716,000 2,843,907,658 14,371,371,297 79,169,534,046 3,723,196,872 34,868,429, ,380,541 1,124,918,562 2,714,567,855 2,650,066,662 1,535,712,017 7,480,263, ,222,620 4,172,564,367 11,434,071, ,162,330, Risk Weighted Risk Weighted Exposure Asset Asset 163,776,094 60,358,000 1,084,382,372 2,874,274,259 60,833,524, ,125,746 26,151,321, ,380, ,459,281 2,714,567,855 3,241,397,250 2,303,568,026 9,350,329, ,528,275 4,172,564,367 2,911,921, ,143,479,729 1,236,694,276 23,959,823, ,529, ,132,822 3,176,508,100 11,054,879,567 58,457,025,950 4,151,019,618 30,346,823, ,192, ,051,673 3,184,952,559 2,992,560,125 1,040,780,140 7,558,680, ,077,000 4,229,520,560 9,895,909, ,907,161, ,264,763 78,566,411 1,310,148,100 2,210,975,913 49,405,944, ,302,029 22,760,117, ,192, ,525,837 3,184,952,559 4,213,007,714 1,561,170,209 9,448,350, ,846,250 4,229,520,560 2,385,194, ,944,080,682 Annual Report

168 Detailed of Risk Weighted Assets under Basel II At 31 December 2013 AnnexE Credit Risk Off Balance Sheet Sl. 1 a) b) c) d) e) f) g) h) i) j) k) l) m) n) Exposure Type 2 Claims on Bangladesh Government and Bangladesh Bank Claims on other Sovereigns & Central Banks* Claims on Bank for International Settlements, International Monetary Fund and European Central Bank Claims on Multilateral Development Banks (MDBs) Claims on Public Sector Entities (other than Government) in Bangladesh Claims on Banks: i) Maturity over 3 months ii) Maturity less than 3 months Claims on Corporate (excluding equity exposure) Against retail portfolio & Small Enterprise (excluding consumer loan) Consumer Loan Claims fully secured by residential property Claims fully secured by commercial real estate Investments in venture capital Capital Market Exposure All other assets Total Exposure Risk Weighted Asset Exposure 3 159,700,000 41,712,119, ,300,829 2,020,000 42,754,140,804 31,940,000 34,539,811, ,225,622 2,020,000 35,233,996, ,450,000 27,540,540, ,186,910 36,184,688 28,394,362,285 Risk Weighted Asset 4 29,090,000 21,539,500, ,140,182 36,184,688 22,108,915,306 Annual Report

169 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 Annex E1 These disclosures have been made in accordance with the Bangladesh Bank BRPD Circular no.35 of 29 December 2010 as to Guidelines on Risk Based Capital Adequacy for Banks in line with Basel II. 1. Capital Adequacy under BaselII To cope with the international best practices and to make the Bank s capital more risk sensitive as well as more shock resilient, Guidelines on Risk Based Capital Adequacy (RBCA) for Banks (Revised regulatory capital framework in line with Basel II) have been introduced from January 01, Throughout the year 2009, Basel II reporting was parallel to Basel I which was the statutory requirement upto that year. However, beginning year 2010, Basel II became mandatory. Bangladesh Bank further reviewed the RBCA Guidelines on several occasions prior to Basel II became fully in force. Instructions regarding Minimum Capital Requirement (MCR), Adequate Capital, and Disclosure requirements as stated in these guidelines have to be followed by all scheduled banks for the purpose of statutory compliance. Above guidelines were issued by Bangladesh Bank (BB) under section 13 and section 45 of the Bank Company (Amendment) Act, 2013 and also in accordance with International Convergence of Capital Measurement and Capital Standards: A Revised Framework of June, 2006 (popularly known as `Basel II Capital Adequacy Framework ) released by Basel Committee on Banking Supervision (BCBS). Basel II guidelines are structured on the following aspects: a) Minimum capital requirements to be maintained by a Bank against credit, market, and operational risks. b) Process for assessing the overall capital adequacy aligned with risk profile of a Bank as well as capital growth plan. c) Framework of public disclosure on the position of a Bank s risk profiles, capital adequacy, and risk management system. 2. Scope of application Basel II guidelines apply to all scheduled banks on Solo basis as well as on Consolidated basis where Solo Basis refers to all position of the bank and its local and overseas branches/offices; and Consolidated Basis refers to all position of the bank (including its local and overseas branches/offices) and its subsidiary company(ies) engaged in financial (excluding insurance) activities like merchant banks, brokerage firms, discount houses, etc. (if any). AB Bank followed the scope narrated above. Bank has Tier 1 and 2 capital structure at the moment. 3. Capital base Regulatory capital has been categorized into three tiers: Tier 1, Tier 2, and Tier 3 respectively. a) Tier 1 capital Tier 1 capital called Core Capital comprises of highest quality of capital elements that consists of: i) Paid up capital ii) Nonrepayable share premium account iii) Statutory reserve iv) General reserve v) Retained earnings vi) Minority interest in subsidiaries vii) Noncumulative irredeemable preference shares viii) Dividend equalization account Bank's Core Capital comprises of the above elements except for 'Nonrepayable share premium account' 'Noncumulative irredeemable preference shares' and 'Dividend Equisilation Account'. Annual Report

170 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 b) Tier 2 capital AnnexE1 Tier 2 capital called Supplementary Capital represents other elements which fall short of some of the characteristics of the core capital but contribute to the overall strength of a bank and consists of: i) General provision ii) Revaluation reserves > Revaluation reserve for fixed assets > Revaluation reserve for securities > Revaluation reserve for equity instrument iii) All other preference shares iv) Subordinated debt Bank's Tier 2 capital comprises of above specified elements. However, Bank is yet to resort to preference shares or any kind of subordinate debts. c) Tier 3 capital Tier 3 capital called Additional Supplementary Capital, consists of shortterm subordinated debt (original maturity less than or equal to five years but greater than or equal to two years) would be solely for the purpose of meeting a proportion of the capital requirements for market risk. Bank has no Tier 3 capital as mentioned earlier. 4. Conditions for maintaining regulatory capital The calculation of Tier 1 capital, Tier 2 capital, and Tier 3 capital is subject to the following conditions: a) The amount of Tier 2 capital will be limited to 100% of the amount of Tier 1 capital. b) 50 percent of revaluation reserves for fixed assets and securities eligible for Tier 2 capital. c) 10 percent of revaluation reserves for equity instruments eligible for Tier 2 capital. d) Subordinated debt shall be limited to a maximum of 30% of the amount of Tier 1 capital. e) Limitation of Tier 3: A minimum of about 28.5 percent of market risk needs to be supported by Tier 1 capital. Supporting of Market Risk from Tier 3 capital shall be limited up to maximum of 250 percent of a bank s Tier 1 capital that is available after meeting credit risk capital requirement. Bank complied with the conditions as embodied in this respect wherever applicable. 5. Eligible regulatory capital In order to obtain the eligible regulatory capital for the purpose of calculating Capital Adequacy Ratio (CAR), banks are required to make following deductions from their Tier1 capital: a) Intangible asset e.g., book value of goodwill and value of any contingent assets, etc. which are shown as assets b) Shortfall in provisions required against classified assets c) Shortfall in provisions required against investment in shares d) Remaining deficit on account of revaluation of investments in securities after netting off from any other surplus on the securities. e) Reciprocal/crossholdings of bank s capital/subordinated debt artificially intended to inflate the capital position of banks f) Holding of equity shares in any form exceeding the approved limit under section 26(2) of the Bank Company (Amendment) Act, The additional/unauthorized amount of holdings will be deducted at 50 percent from Tier 1 capital and 50% from Tier 2 capital. Annual Report

171 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 AnnexE1 g) Investments in subsidiaries which are not consolidated. The normal practice is to consolidate subsidiaries for the purpose of assessing the capital adequacy of banking groups. Where this is not done, deduction is essential to prevent the multiple uses of the same capital resources in different parts of the group. The deduction for such investments will be 50% from Tier 1 capital and 50% from Tier 2 capital. The assets representing the investments in subsidiary companies whose capital had been deducted from that of the parent would not be included in total assets for the purposes of computing the Capital Adequacy Ratio (CAR). Eligible Tie r 2 capital will be derived after deducting components (if any) qualified for deduction. Total eligible regulatory capital will be calculated by summing up the eligible Tier 1, Tier 2 and Tier 3 capital. 6. Calculation of Capital Adequacy Ratio In order to calculate CAR, banks are required to calculate their Risk Weighted Assets (RWA) on the basis of credit, market, and operational risks. Total RWA will be determined by multiplying the amount of capital charge for market risk and operational risk by the reciprocal of the minimum CAR and adding the resulting figures to the sum of risk weighted assets for credit risk. The CAR is then calculated by taking eligible regulatory capital as numerator and total RWA as denominator. Bank followed the given guidelines in proper terms. 7. Minimum capital requirements a) All Scheduled Banks in Bangladesh carrying its business in Bangladesh have to maintain the minimum required capital fixed by BB from time to time as per section 13 of Bank Company (Amendment) Act, b) Banks have to maintain minimum CAR on Solo basis as well as on Consolidated basis as per instruction(s) given by BB from time to time. c) Banks have to maintain at least 50% of required capital as Tier I capital Bank has been able to maintain required CAR on both 'Solo (10.80%)' as well as 'Consolidated (10.85%)' basis. Banks presents Tier I Capital ratio is 82.94% and 82.55% to total Capital on Solo and Consolidated basis respectively. 8. a) Credit Risk Credit risk is the potential that a bank borrower or counterparty fails to meet its obligation in accordance with agreed term. Bank followed the suggested methodology, process as contained in the Guidelines. b) Methodology Bangladesh Bank adopted Standardized Approach for calculating Risk Weighted Assets. The capital requirement for credit risk is based on the risk assessment made by external credit assessment institutions (ECAIs) recognized by BB for capital adequacy purposes. Banks are required to assign a risk weight to all their onbalance sheet and offbalance sheet exposures. Risk weights are based on external credit rating (solicited) which was mapped with the BB rating grade or a fixed weight that is specified by Bangladesh Bank. c) Credit Risk Mitigation AB Bank uses a number of techniques to reduce its credit risk to which the Bank is exposed. For example, exposures may be collateralized by first priority claims, in whole as in part with cash or securities, a loan exposure may be guaranteed by a third party. Additionally, Bank may agree to net loans owed to them against deposits from the same counterparty. Bank uses Comprehensive Approach as adopted by the Central Bank. In this approach when taking collateral, Bank will need to calculate adjusted exposure to a counterparty for capital adequacy purposes in order to take account of the effects of that collateral. Using haircut, Bank is required to adjust both the amount of the exposure to the counterparty and the value of any collateral received in support of that counterparty to take account of possible future fluctuations in the value of either, occasioned by market movements. This will produce volatility adjusted amounts for both exposure and collateral. Annual Report

172 Disclosures on Risk Based Capital (Basel II) Based on 31 December a) Market Risk AnnexE1 Market risk is defined as the risk of losses in on and offbalance sheet positions arising from movements in market prices. The market risk positions subject to this requirement are: i) The risks pertaining to interest rate related instruments and equities in the trading book; and ii) Foreign exchange risk and commodities risk throughout the bank (both in the banking and in the trading book). b) Methodology In Standardized Approach, the capital requirement for various market risks (interest rate risk, equity price risk, commodity price risk, and foreign exchange risk) is determined separately. The total capital requirement in respect of market risk is the sum of capital requirement calculated for each of these market risk subcategories. The methodology to calculate capital requirement under Standardized Approach for each of these market risk categories is as follows: a) Capital Charge for Interest Rate Risk = Capital Charge for Specific Risk + Capital Charge for General Market Risk. b) Capital Charge for Equity Position Risk = Capital Charge for Specific Risk + Capital Charge for General Market Risk. c) Capital Charge for Foreign Exchange Risk = Capital Charge for General Market Risk d) Capital Charge for Commodity Position Risk = Capital Charge for General Market Risk Bank followed the suggested methodology, process as contained in the Guidelines. 10. a) Operational Risk Operational Risk is defined as the risk of losses resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputation risk. b) Measurement Methodology Banks operating in Bangladesh shall compute the capital requirements for operational risk under the Basic Indicator Approach (BIA). Under BIA, the capital charge for operational risk is a fixed percentage, denoted by (alpha), of average positive annual gross income of the bank over the past three years. Figures for any year in which annual gross income is negative or zero, should be excluded from both the numerator and denominator when calculating the average. Bank followed the suggested methodology, process as contained in the Guidelines. 11. Disclosure under Pillar III Disclosure given below as specified by RBCA Guidelines dated 29 December 2010: A) Scope of Application Qualitative Disclosure (a) The name of the top corporate entity in the group to which this guidelines applies. (b) An outline of differences in the basis of consolidation for accounting and regulatory purposes, with a brief description of the entities within the group (a) that are fully consolidated; (b) that are given a deduction treatment; and (c) that are neither consolidated nor deducted (e.g. where the investment is risk weighted) The consolidated financial statements of the Bank include the financial statements of (a) (b) AB Investment Limited (c) AB Securities Limited (d) Cash Link Bangladesh Limited (e) AB International Finance Limited and (f) AB Exchange (UK) Limited. A brief description of these are given below: Annual Report

173 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 Qualitative Disclosure AnnexE1 (b) (ABBL) is one of the first generation private commercial banks (PCBs), incorporated in Bangladesh on 31 December 1981 as a public limited company under the Companies Act 1913, subsequently replaced by the Companies Act 1994, and governed by the Bank Company (Amendment) Act The Bank went for public issue of its shares on 28 December 1983 and its shares are listed with Dhaka Stock Exchange and Chittagong Stock Exchange respectively. has 89 Branches including 1 Islami Banking Branch, 1 Overseas Branch in Mumbai, India. The Bank has six (06) subsidiary companies, AB Investment Limited, AB Securities Limited, CashLink Bangladesh Limited, AB International Finance Limited, incorporated in Hong Kong, AB Exchange (UK) Limited and Arab Bangladesh Bank Foundation. AB Investment Limited AB Investment Limited (ABIL), a Subsidiary of was incorporated under the Companies Act, 1994 on 24 December 2009 with a view to run and manage the operations of Merchant Banking Wing of AB Bank Limited independently. AB Investment Limited started its operation on 10 March AB Investment Limited has achieved an unparallel reputation as a leading Merchant Banker through providing portfolio management services by maintaining a high level of professional expertise and integrity in client relationship. ABIL's Registered Office is located at WW Tower (Level 7), 68 Motijheel C.A., Dhaka. ABIL has two branch offices at Agrabad, Chittagong and Chowhatta, Sylhet. AB Securities Limited Brokerage business of Arab Bangladesh Bank Foundation has been transferred to the newly formed AB Securities Limited (ABSL) vide Bangladesh Bank approval letter BRPD(R1)717/ dated 08 November Main objective of the company is to act as a stock broker to buy and sell Securities, Bond, and Debenture etc. on behalf of clients. ABSL also manages its own portfolio under Stock Dealer License. ABSL is a member of both Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. Respectively. ABSL started it s operations independently on 02 August 2010, before that it operated under the ABBF License. CashLink Bangladesh Limited CashLink Bangladesh Limited (CBL) was incorporated on 24 September 2008 in Bangladesh under the Companies Act 1994 as a private company limited. presently holds 90% shares in CBL. The principal activity of the company is to install and operate a switched Automated Teller Machines (ATM) and Point of Sales (POS) network on behalf of a number of local and foreign banks enabling these member bank customers who are active cardholders to withdraw cash, make utility bill payments (e.g. water, gas, electricity and telephone bills) and to purchase commodity goods from any of the ATM and POS terminals established under the network. AB International Finance Limited AB International Finance Limited (ABIFL) is a company incorporated and domiciled in Hong Kong and has its registered office and principal place of business at Unit 1201B, 12/F, Admiralty Centre, Tower One, 18 Harcourt, Hong Kong. AB Exchange (UK) Limited AB Exchange (UK) Limited (ABEL) is a company incorporated and domiciled in United Kingdom (UK) and has its registered office 69 Whitechapel High Street, London, E1 7PL. Its registered number is (England & Wales). ABEL is fully owned (100%) Subsidiary of. Annual Report

174 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 Qualitative Disclosure AnnexE1 (b) Arab Bangladesh Bank Foundation Bank also has a Subsidiary (99.60% owned by AB Bank) for philanthropic/ CSR activities known as Arab Bangladesh Bank Foundation (ABBF). This has not been included in the Consolidation as ABBF operated only for philanthropic purpose and its profit is not distributable to the shareholders. Thus, for ensuring the fair presentation of the Financial Statements of the Parent Company (the Bank), the Financial Statements of ABBF has not been consolidated. (c) Any restrictions, or other major impediments, on transfer of funds or regulatory capital within the group Not Applicable (d) The aggregate amount of capital deficiencies in all subsidiaries not included in the consolidation that are deducted and the name(s) of such subsidiaries. B) Capital Structure Qualitative Disclosure Aggregate amount of Capital: Tk. 20,000,000 Name of Subsidiary: Arab Bangladesh Bank Foundation (ABBF) (a) Summary information on the terms and conditions of the main features of all capital instruments, especially in the case of capital instruments eligible for inclusion in Tier 1 or in Tier 2. The terms and conditions of the main features of all capital instruments have been segregated in line with of the eligibility criteria set forth vide BRPD Circular No. 35 dated 29 December 2010 and other relevant instructions given by Bangladesh Bank from time to time. The main features of the capital instruments are as follows: Tier 1 capital instruments Paidup share capital: Issued, subscribed and fully paid up share capital of the Bank. It represents Paid up Capital, Right Shares as well as Bonus Shares issued from time to time. Statutory Reserve: As per Section 24(1) of the Bank Company (Amendment) Act, 2013, an amount equivalent to 20% of the profit before taxes for each year of the Bank has been transferred to the Statutory Reserve Fund. General reserve: Any reserve created through Profit and Loss Appropriation Account for fulfilling any purpose. Retained Earnings: Amount of profit retained with the banking company after meeting up all expenses, provisions and appropriations. Bank is complied in this respect. Tier 2 capital instruments General provision maintained against unclassified loans and offbalance sheet exposures: As per BB directive, amount of provision maintained against unclassified loans and offbalance sheet exposures as of the reporting date has been considered. Asset revaluation reserve: 50% of Assets Revaluation Reserve is considered as Tier 2 Capital. The revaluation of assets was formally conducted by the Professionally Qualified valuation firm and duly certified by the external auditor of the Bank. Revaluation reserves of securities: As per Bangladesh Bank's instruction, up to 50% of revaluation reserves of Governments securities has been considered as Tier 2 Capital. This comprises of revaluation results of HFT and HTM securities. Annual Report

175 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 AnnexE1 (b) The amount of Tier 1 Capital, with separate disclosure of: (as of ). (c ) Total amount of Tier II & Tier III Capital (d) Other deduction from Capital (e) Total eligible capital > Paid up Capital > Non repayable share premium account > Statutory reserve > General reserve > Retained earnings > Minority Interest in Subsidiaries > Non cumulative irredeemable preference shares > Dividend equalization account in Crore Solo Conso Solo Conso , , (2) 1, , , , (2.02) 1, ,742 C) Capital Adequacy Qualitative Disclosure (a) A summary discussion of the Bank's approach to assessing the adequacy of its capital to support current and future activities. Capital Adequacy is the cushion required to be maintained for covering the Credit risk, Market risk and Operational risk so as to protect the depositors and general creditors interest against such losses. In line with BRPD Circular No. 35 dated 29 December, 2010, the Bank has adopted Standardized Approach for Credit Risk, Standardized (Rule Based) Approach for Market Risk and Basic Indicator Approach for Operational Risk for computing Capital Adequacy. (b) (C) (d) (e) Capital requirement for Credit Risk Capital requirement for Market Risk Capital requirement for Operational Risk Total and Tier I Capital Ratio: > For the Bank alone > For the consolidated group in Crore Solo Conso Solo Conso 1, % 1, % 1, % 1, % D) Credit Risk Qualitative Disclosure (a) The general qualitative disclosure requirement with respect to credit risk, including: > Definitions of past due and impaired (for accounting purposes) Bank classifies loans and advances (loans and bill discount in the nature of an advance) into performing and nonperforming loans (NPL) in accordance with the Bangladesh Bank guidelines in this respect. An NPA (impaired) is defined as a loan or an advance where interest and/ or installment of principal remain overdue for more than 90 days in respect of a Continuous credit, Demand loan or a Term Loan etc. Annual Report

176 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 AnnexE1 (a) cont. Classified loan is categorized under following 03 (three) categories: > Substandard > Doubtful > Bad & Loss Any continuous loan will be classified as: > Substandard' if it is past due/over due for 3 months or beyond but less than 6 months. > "Doubtful' if it is past due/over due for 6 months or beyond but less than 9 months. > Bad/Loss' if it is past due/over due for 9 months or beyond. Any Demand Loan will be classified as: > Substandard' if it remains past due/overdue for 3 months or beyond but not over 6 months from the date of claim by the bank or from the date of creation of forced loan. > Doubtful' if it remains past due/overdue for 6 months or beyond but not over 9 months from the date of claim by the bank or from the date of creation of forced loan. > Bad/Loss' if it remains past due/overdue for 9 months or beyond from the date of claim by the bank or from the date of creation of forced loan. In case of any installment(s) or part of installment(s) of a Fixed Term Loan is not repaid within the due date, the amount of unpaid installment(s) will be termed as `defaulted installment'. i. In case of Fixed Term Loans : > If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 3 (three) months, the entire loan will be classified as ''Substandard''. > If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 6 (six) months, the entire loan will be classified as ''Doubtful". > If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 9 (nine) months, the entire loan will be classified as ''Bad/Loss''. If any Fixed Term Loan is repayable on monthly installment basis, the amount of installment(s) due within 06 (six) months will be equal to the sum of 06 monthly installments. Similarly, if the loan is repayable on quarterly installment basis, the amount of installment(s) due within 06 (six) months will be equal to the sum of 2 quarterly installments. Annual Report

177 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 AnnexE1 > Description of approaches followed for specific and general allowances and statistical methods Types of loans and advances Consumer House building and professionals to setup business Other than Housing Finance & Professionals to setup business Provision for loan to Brokerage House, Merchant Banks, Stock dealers Shortterm agricredit and micro credit Small & Medium Enterprise Finance Others UC 2% 5% 2% 5% 0.25% 1% Provision SMA SS DF 2% 5% 20% 20% 50% 50% BL 100% 100% 2% 20% 5% 20% 20% 50% 5% 50% 50% 100% 100% 100% 100% 0.25% 1% > Discussion of the Bank's credit risk management policy The Board approves the credit policy keeping in view relevant Bangladesh Bank guidelines to ensure best practice in credit risk management and maintain quality of assets. Authorities are properly delegated in ensuring check and balance in credit operation at every stage i.e. screening, assessing risk, identification, management and mitigation of credit risk as well as monitoring, supervision and recovery of loans with provision for early warning system. There is a separate Credit Risk Management Division for ensuring proper risk management of Loans and Credit Monitoring and Recovery Division for monitoring and recovery of irregular loans. Internal control & compliance division independently assess quality of loans and compliance status at least once in a year. Adequate provision is maintained against classified loans as per Bangladesh Bank Guidelines. Status of loans are regularly reported to the Board/ Board Audit Committee. Besides, Credit risk management process involves focused on monitoring of Top 30 Loans, Top 20 Defaulters, Sectoral exposures vizaviz among others limit. Quantatitive Disclosure In % 2013 (Cr) In % 2012 (Cr) (b) Total gross credit risk exposures broken Overdraft 14.52% 2, % 1, down by major types of credit exposure Cash Credit 0.01% % 4.75 Time loan 29.59% 4, % 2, Term loan 38.49% 5, % 4, Blc 0.23% % TR 9.39% 1, % 1, Packing credit 0.29% % Loanaccp bills 5.25% % Consumer Loan 1.03% % Staff Loan 0.46% % Bills Purchased 0.75% % & Discounted Total 100% 14, % 10,607 Annual Report

178 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 AnnexE1 (c) (d) (e) (f) Geographical distribution of exposures, broken down in significant areas by major types of credit exposure Industry or counterparty type distribution of exposures, broken down by major types of credit exposure. Residual contractual maturity breakdown of the whole portfolio, broken down by major types of credit exposure. By major industry or counterparty type: Urban Branches Dhaka Chittagong Khulna Sylhet Barisal Rajshahi Rangpur Rural Branches Dhaka Chittagong Khulna Sylhet Barisal Rajshahi Outside Bangladesh ABBL, Mumbai Branch Agriculture Large and medium scale industry Working capital Export Commercial lending Small and cottage industry Others Repayable on demand upto 3 months over 3 months but below 1 year over 1 year but below 5 years over 5 years 2013 In % (Cr) 65% % % 483 2% 209 0% 38 3% 359 2% % 13,582 85% 12% 0% 2% 0% 0% 100% % % 14,012 2% % 3,011 0% 28 1% % 3,503 0% 63 50% 6, % 14,012 2% % 5,499 40% 5,668 16% 2,286 2% % 14, In % (Cr) 68% 6,993 21% 2,134 4% 418 2% 191 0% 32 3% 264 2% % 10,253 85% 12% 3% 100% % % 10,607 2% % 2,216 18% 1,957 1% % 3,549 0% 48 23% 2, % 10,607 1% 78 41% 4,316 24% 2,584 27% 2,889 7% % 10,607 i. Amount of impaired loans and if available, past due loans, provided separately ii. Specific and general provisions iii. Charges for specific allowances and chargeoffs during the period Annual Report

179 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 AnnexE1 (g) Gross Non Performing Assets (NPAs) Non Performing Assets ( NPAs) to Outstanding Loans & advances Non Performing Assets (NPAs) Movement of Specific Provision for Non Performing Assets (NPAs) Opening Balance Provision made during the period Write off Transferred from other assets provisions Transfer from General Provisions Closing balance Provision held by Mumbai Branch E) Equities: Disclosures for Banking Book Positions Qualitative Disclosure (a) The general qualitative disclosure requirement with respect to the equity risk, including: > differentiation between holdings on which capital gains are expected and those taken under other objectives including for relationship and strategic reasons; and > discussion of important policies covering the valuation and accounting of equity holdings in the banking book. This includes the accounting techniques and valuation methodologies used, including key assumptions and practices affecting valuation as well as significant changes in these practices. (b) Value disclosed in the balance sheet of investment, as well as the fair value of those investments; for quoted securities, a comparison to publicly quoted share values where the share price is materially different from fair value. (C) The cumulative realized gains (losses) arising from sales and liquidations in the reporting period (2013). (d) > Total unrealized gains (losses) > Total latent revaluation gains (losses) > Any amounts of the above included in Tier 2 capital (e) Capital requirements broken down by appropriate equity grouping, consistent with the bank's methodology, as well as the aggregate amounts and the type of equity investments subject to any supervisory provisions regarding regulatory capital requirements Investment in equity mainly for capital gain purpose but Bank has some investment for relationship and strategic reasons. Quoted shares are valued at cost. Necessary provision is maintained if market price fall below the cost price. Unquoted shares are valued at cost. Not Applicable in Crore 9.06 (199.38) Nil Nil Nil Annual Report

180 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 AnnexE1 F) Interest rate risk in the banking book (IRRBB) Qualitative Disclosure (a) The general qualitative disclosure requirement including the nature of IRRBB and key assumptions, including assumptions regarding loan prepayments and behavior of nonmaturity deposits, and frequency of IRRBB measurement. Interest rate risk is the potential that the value of the On Balance Sheet and the Off Balance Sheet position of the Bank would be negatively effected with the change in the Interest rate. The vulnerability of an institution towards the advance movement of the interest rate can be gauged by using Duration GAP under Stress Testing Analysis. AB Bank has also been exercising the Stress Testing using the Duration GAP for measuring the Interest Rate Risk on its On Balance Sheet exposure for estimating the impact of the net change in the market value of equity on the Capital Adequacy Ratio (CAR) due to change in interest rates only on its On Balance Sheet position (as the Bank holds no interest bearing Off Balance Sheet positions and or Derivatives). Under the assumption of three different interest rate changes i.e. 1%, 2% and 3%. (b) Quantitative Disclosure The increase (decline) in earnings or economic value (or relevant measure used by management) for upward and downward rate shocks according to management s method for measuring IRRBB, broken down by currency (as relevant). Market Value of Assets Market Value of Liability Weighted Avg. Duration GAP CAR after different level of Shocks: Minor Level Moderate Level Major Level ,461 19, in Crore ,089 15, % 9.91% 9.46% 11.24% 10.74% 10.24% G) Market Risk Qualitative Disclosure (a) (b) (c) (d) Views of BOD on trading/ investment activities Methods used to measure Market risk Market risk Management system Policies and process for mitigating market risk The Board approves all policies related to market risk, sets limits and reviews compliance on a regular basis. The objective is to provide cost effective funding last year to finance asset growth and trade related transaction. Standardized approach has been used to measure the market risk. The total capital requirement in respect of market risk is the aggregate capital requirement calculated for each of the risk subcategories. For each risk category minimum capital requirement is measured in terms of two separately calculated capital charges for 'specific risk' and 'general market risk'. The Treasury Division manage market risk covering liquidity, interest rate and foreign exchange risks with oversight from AssetLiability Management Committee (ALCO) comprising senior executives of the Bank. ALCO is chaired by the Managing Director. Alco meets at least once in a month. There are approved limits for Market risk related instruments both onbalance sheet and offbalance sheet items. The limits are monitored and enforced on a regular basis to protect against market risks. The exchange rate committee of the Bank meets on a daily basis to review the prevailing market condition, exchange rate, forex position and transactions to mitigate foreign exchange risks. Annual Report

181 Disclosures on Risk Based Capital (Basel II) Based on 31 December 2013 AnnexE1 Quantitative Disclosure (b) The capital requirements for: Interest rate risk Equity position risk Foreign exchange risk Commodity risk in Crore H) Operational Risk Qualitative Disclosure (a) > Views of BOD on system to reduce Operational Risk The policy for operational risks including internal control & compliance risk is approved by the board taking into account relevant guidelines of Bangladesh Bank. Audit Committee of the Borad oversees the activities of Internal Control & Compliance Division (ICCD) to protect against all operational risk. > Performance gap of executives and staffs > Potential external events > Policies and processes for mitigating operational risk > Approach for calculating capital charge for operational risk AB has a policy to provide competitive package and best working environment to attract and retain the most talented people available in the industry. AB's strong brand image plays an important role in employee motivation. As a result, there is no significant performance gap. No potential external events is expected to expose the Bank to significant operational risk. The policy for operational risks including internal control & compliance risk is approved by the Board taking into account relevant guidelines of Bangladesh bank. Policy guidelines on Risk Based Internal Audit system is in operation as per RBA branches are rated according to their risk status and branches scoring more on risk status are subjected to more frequent audit by Internal Control & Compliance Division (ICCD). It is the policy of the bank to put all the branches of the bank under any form of audit at least once in a year. ICCD directly report to Audit Committee of the Board. In addition there is a Vigilance Cell established in 2009 to reinforce operational risk management of the bank. Bank's AntiMoney laundering activities are headed by CAMELCO and their activities are devoted to protect against all money laundering and terrorist finance related activities. Apart from that, there is adequate check & balance at every stage of operation, authorities are properly segregated and there is at least dual control on every transaction to protect against operational risk. Basic Indicator Approach was used for calculating capital charge for operational risk as of the reporting date. Quantitative Disclosure (b) in Crore The capital requirements for Operational Risk Annual Report

182 Mumbai Branch Balance Sheet as at 31 December 2013 PROPERTY AND ASSETS Cash In hand (including foreign currencies) Balance with Reserve Bank India (including foreign currencies) Balance with other banks and financial institutions In India Outside India Money at call and on short notice Investments Government Others Loans and advances Loans, cash credits, overdrafts, etc. Bills purchased and discounted Fixed assets including premises, furniture and fixtures Other assets Nonbanking assets Total Assets LIABILITIES AND CAPITAL Liabilities Borrowings from other banks, financial institutions and agents Deposits and other accounts Current deposits Demand deposits Bills payable Savings deposits Fixed deposits Other deposits Other liabilities Total Liabilities Capital/Shareholders' Equity Total Shareholders' Equity Paidup capital Statutory reserve Other reserve Retained earnings Total Liabilities and Shareholders' Equity INR 16,700,309 3,457,922 13,242, ,447,040 18,562, ,884, ,500, ,297, ,997,760 28,300, ,350, ,290, ,060,863 9,179, ,449,715 1,759,925, ,632, ,207,142 1,593, ,396 13,988, ,205, ,200, ,833, ,091, ,822, ,959, ,309,689 1,759,925, INR AnnexF 21,954,876 3,753,016 18,201, ,233,839 10,304, ,929, ,000, ,328, ,878,961 44,450, ,377, ,511, ,866,327 11,525, ,154,394 1,717,575, ,609, ,933,661 6,739, ,693 6,354, ,440,787 2,360, ,242, ,852, ,722, ,822, ,985,000 8,108, ,807,121 1,717,575,548 Annual Report

183 Mumbai Branch Profit and Loss Account for the year ended 31 December 2013 AnnexF1 OPERATING INCOME 2013 INR 2012 INR Interest income Interest paid on deposits and borrowings, etc. Net interest income 49,015,158 (16,025,142) 32,990,016 51,922,711 (11,258,453) 40,664,258 Investment income Commission, exchange and brokerage Other operating income Total operating income (a) 20,755, ,951,262 2,516, ,222, ,212,876 14,818, ,607,316 2,737, ,163, ,827,947 OPERATING EXPENSES Salary and allowances Rent, taxes, insurance, electricity, etc. Legal expenses Postage, stamps, telecommunication, etc. Stationery, printing, advertisement, etc. Auditors' fees Depreciation and repairs of Bank's assets Other expenses Total operating expenses (b) Profit before provision (c = ab) 12,635,526 11,014, ,326 5,210,650 1,753, ,082 8,427,821 79,517, ,477, ,735,197 12,352,499 4,302,717 95,900 5,411,767 2,445,210 1,048,195 8,219,811 61,189,916 95,066, ,761,932 Provision against loans and advances Provision for investments Fluctuation reserve Other provisions Total provision (d) Profit before taxation (cd) Provision for taxation Current tax Excess provision written back Deferred tax Net profit after taxation 91,700 1,200,000 1,291, ,443,497 59,074,929 60,338,200 (1,263,271) 81,368, , , ,499,832 48,930,729 52,382,316 (3,565,792) 114,205 93,569,103 Annual Report

184 Islami Banking Branch Balance Sheet as at 31 December 2013 AnnexG PROPERTY AND ASSETS Cash in hand Cash in Hand (Including foreign currencies) Balance with Bangladesh Bank and its Agent Banks Balance with Other Banks and Financial Institutions In Bangladesh Outside Bangladesh Placement with other Banks & Financial Institutions Investment in shares & securities Government Others Investments General Investments etc. Bills Purchased & Negotiated Fixed Assets including Premises Other Assets NonBanking Assets Total Assets ,775,049 2,105, ,669,787 4,565,622,862 4,565,622, ,000, ,000,000 3,296,046,079 3,296,046,079 11,637,075 94,807,575 8,384,888, ,226,727 2,414, ,811,832 5,502,843,390 5,502,843, ,800, ,800,000 2,453,338,923 2,449,469,179 3,869,744 13,002, ,682,075 8,352,893,694 LIABILITIES Placement from Banks (BGIIB)& Other Financial Institutions Deposits and Other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits AlWadeeah Current and Other Deposit Accounts Bills Payable Other Liabilities Total Liabilities 1,810,228,912 6,542,777,785 61,290,349 4,578,456,124 1,828,085,289 70,557,429 4,388,594 31,881,943 8,384,888,641 3,000,800,000 5,341,843,049 52,966,084 5,038,999, ,618,998 44,190,175 3,068,300 10,250,645 8,352,893,694 Annual Report

185 Islami Banking Branch Profit and Loss Account for the year ended 31 December 2013 AnnexG Investment Income Profit paid on Deposits Net Investment Income Income from Investments in Shares/Securities Commission, Exchange and Brokerage Other Operating Income Total Operating Income 899,056, ,424, ,631,782 10,250,237 19,403,895 2,547, ,833, ,278, ,872, ,405,635 1,793,084 52,957,655 1,316, ,472,716 Operating Expenses Salaries and Allowances Rent, Taxes, Insurance, Electricity etc. Legal Expenses Postage, Stamps, Telecommunication etc. Stationeries, Printing and Advertisement etc. Shariah Supervisory Committee's Fees & Expenses Depreciation and repair to Bank's Assets Other Expenses Total Operating Expenses Profit before Provisions 22,117,116 1,395, ,871 1,012, ,536 2,726,100 6,272,704 33,997, ,835,656 20,781,477 1,410,564 10, ,740 1,415, ,333 2,772,124 5,958,985 32,825, ,647,157 Annual Report

186 Islami Banking Branch Profit Paid on Deposits AnnexH Profit and loss of Islami Banking Branch is calculated annually as at 31 December in every year. More than 60% of investment income is distributed among the different types of Mudaraba depositors following weightage system and the remaining portion is retained by the bank to meet administrative expenses and investment loss offsetting reserve. Provisional profit rates are applied to the different types of deposit A/Cs as decided by the Bank from time to time commensurate with weightage taking into consideration of the industry trend and that of the rates of other Islamic banks in the country. In the year 2013 final profit has been paid to the depositors as per following weightage and rates: Types of Deposit Weightage Final Rate of Profit (%) 1. Mudaraba Savings Deposits 2. Mudaraba Special Notice Deposits a. General b. Inter Bank 3. Mudaraba Term Deposits a. General 36 Months 24 Months 12 Months 6 Months 3 Months 1 Month b. Inter Bank 12 Months 6 Months 4. Mudaraba Probable Millionaire Scheme 5. Mudaraba Quarterly Profit Paying Scheme 6. Mudaraba Hajj Deposit Scheme 7. Mudaraba Pension Deposit Scheme 8. Mudaraba Monthly Profit Payment Scheme 9. Mudaraba Cash WAQF Deposit to to to to to to to to to to to to to to to to to to to to to to to to to to A competent Shariah Supervisory Committee consisting of Islamic scholars, Ulema, Fuqaha and Islamic bankers headed by Mr. Shah Abdul Hannan, a prominent Islamic scholar and former Secretary, Government of Bangladesh guides the Islamic banking operations of the bank. During the year 2013, Shariah Supervisory Committee met in 4 (four) meetings (2 meetings of full Committee and 2 meetings of it s Standing Committee) and reviewed different operational issues. The Committee also audited the branch through it s Muraquib and reviewed the audit report in it s regular meeting. Shariah Supervisory Committee observed that both the officials and clients of the branch became more cautious about the compliance of Shariah Principles. Annual Report

187 Custodian Wing Balance Sheet At 31 December 2013 ASSETS AnnexI NonCurrent Assets Property, Plant and Equipment Intangible Assets Total Non Current Assets Current Assets Cash and Bank Balances Advance, Deposit and Prepayments Accounts Receivables Total Current Assets Total Assets 10,219,252 10,219,252 10,219,252 6,262,402 6,262,402 6,262,402 LIABILITIES NonCurrent Liabilities Current Liabilities Payable to AB Bank Accounts Payable Provision for Audit Fees Others Total Current Liabilities Total Liabilities 6,486,708 3,653,194 79,350 10,219,252 10,219,252 2,551,668 3,653,194 52,900 4,640 6,262,402 6,262,402 Profit and Loss Account For the year ended 31 December 2013 Operating Income Commission, exchange and brokerage Total Operating Income ,907,075 4,907, , ,727 Operating Expenses Rent, taxes and insurance Auditor's fees Other expenses Total operating expenses Net Profit 10,000 26, , ,577 4,761,498 52,900 20,521 73,421 55,306 Annual Report

188 OffShore Banking Unit (OBU) Balance Sheet At 31 December 2013 PROPERTY AND ASSETS Cash Cash in Hand (Including foreign Currencies) Balance with Bangladesh Bank and its agent Bank(s) Balance with Other Banks and Financial Institutions In Bangladesh Outside Bangladesh Investment Loans and Advances Loans & Advances Regular Bills Purchased & Discounted ,297, ,954 31,105,130 6,837,141,717 6,837,141, USD 402,535 2, ,066 87,937,514 87,937, ,994,075 61,257 3,932, ,659, ,659,835 AnnexJ USD 50,020 3,826 46,194 8,110,966 8,110,966 Premises and Fixed Assets (WDV) Other Assets Accrued Interest Prepaid Advances Miscellaneous 14,864,383 91,572 14,772, ,182 1, ,004 6,956,521 6,862,476 94,045 87,120 85,942 1,178 Total Assets 6,883,303,184 88,531, ,610,431 8,248,106 LIABILITIES AND CAPITAL Liabilities Borrowing from Bank & Financial Institutions In Bangladesh Outside Bangladesh 6,630,001,101 3,280,369,579 3,349,631,522 85,273,326 42,191,249 43,082, ,749, ,749,606 7,924,238 7,924,238 Deposits and Other Accounts Demand Deposits Demand Deposits Others Other Term Deposit NFCD Total Liabilities 214,616,206 4,225, ,771,744 15,618,613 6,844,617,308 2,760,337 54,352 2,505, ,882 88,033,663 5,613,397 5,445, , ,363,003 70,299 68,199 2,100 7,994,537 Capital and Shareholders' Equity Retained Earnings Total Shareholders' Equity Total Liabilities and Shareholders' Equity 38,685,876 38,685,876 6,883,303, , ,568 88,531,231 20,247,428 20,247, ,610, , ,569 8,248,106 Profit and Loss Account For the year ended 31 December USD USD Interest income Interest paid on deposits and borrowing etc. Net interest income Commission, exchange and brokerage Other operating income Total operating income (A) Salaries and allowances Postage, stamps, telecommunication etc. Other expenses Total operating expenses (A) Net Profit 125,777,076 94,041,883 31,735,193 10,874,968 1,297,409 43,907,570 2,906, ,023 1,959,799 5,167,009 38,740,561 1,617,095 1,208, , ,892 16, ,895 37,261 3,860 25,206 66, ,568 22,518,940 14,804,327 7,714,613 14,306, ,660 22,414,359 1,985, , ,166,931 20,247, , ,402 96, ,162 4, ,706 24,869 2, , ,569 Annual Report

189 Auditor s Report To the Shareholders of AB Investment Limited We have audited the accompanying financial statements of AB Investment Limited (the company), which comprise the statement of financial position (balance sheet) as at 31 December 2013, statement of comprehensive income (profit and loss statement), statement of cash flows and statement of changes in equity for the year ended 31 December 2013, and a summary of significant accounting policies and other explanatory notes. Management's responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Accounting Standards/Bangladesh Financial Reporting Standards, the Companies Act 1994 and other applicable laws and regulations. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors' responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements, prepared in accordance with Bangladesh Accounting Standards/Bangladesh Financial Reporting Standards, give a true and fair view of the state of the company s affairs as at 31 December 2013 and of the results of its operations and its cash flows for the year then ended and comply with the requirements of Companies Act 1994 and other applicable laws and regulations. We also report that: (a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verification thereof; (b) in our opinion, proper books of account as required by law have been kept by the company so far as it appeared from our examination of those books; and (c) the statement of financial position (balance sheet) and statement of comprehensive income (profit and loss statement) dealt with by the report are in agreement with the books of account and returns. House # 51 (3rd Floor), Road # 9, Block # F Banani, Dhaka 1213, Bangladesh Dated, 27 January 2014 S. F. AHMED & CO Chartered Accountants Annual Report

190 AB Investment Limited Statement of Financial Position As at 31 December 2013 AnnexK ASSETS NonCurrent Assets Property, plant and equipment Investment in shares Deferred revenue expenditure Total noncurrent assets ,132, ,286,336 2,887,754 1,289,306, ,947, ,381,829 4,171,190 1,296,500,963 Current Assets Loans to clients Advances, deposits and prepayments Receivable from brokers Advance income tax Cash and cash equivalents Total current assets Total assets 7,136,710, ,473,991 61,933, ,525, ,555 7,546,111,671 8,835,418,224 7,585,189,288 96,487,479 44,357,686 90,528, ,494 7,817,174,117 9,113,675,081 EQUITY AND LIABILITES Paidup capital Retained earnings Share money deposit Total equity 99,900, ,414,904 4,900,100,000 5,449,414,904 99,900, ,771,294 4,900,100,000 5,656,771,294 Noncurrent liabilities Provident fund, gratuity fund and recreation club 4,517,656 3,773,765 Current Liabilities Borrowing from banks Liabilities for expenses Payable against sales proceeds of shares Provision for taxation Provision for unclassified loans and investment Credit balance with clients' accounts Other liability Total current liabilities Total liabilities Total shareholders' equity and liability 2,450,299,268 5,514,781 61,933, ,093, ,286,210 78,359, ,000,000 3,381,485,664 3,386,003,320 8,835,418,224 2,548,509,568 17,408,277 46,857, ,953, ,363,878 79,036, ,000,000 3,453,130,022 3,456,903,787 9,113,675,081 Annual Report

191 AB Investment Limited Statement of Comprehensive Income For the year ended 31 December 2013 AnnexK1 Operating income Interest income Management fee Transaction/Settlement fee Other operating income Total operating income (A) ,099,614 9,156,504 28,216, , ,599, ,716,223 82,384,201 45,223, , ,599,188 Operating expenses Salary and allowances Audit and consultancy Administrative expenses Financial expense Total operating expenses (B) 13,984, ,750 33,008, ,363, ,681,451 15,676, ,700 33,150, ,212, ,303,452 Net operating income (C=AB) 176,918, ,295,736 Non operating income (D) 2,927,653 Investment income (E) (6,140,546) 14,247,525 Profit before provision for loans and investment (F=C+D+E) 173,705, ,543,261 Provision for investment Total provision for loans and investment (G) Net profit before taxation for the year (FG) 65,922,332 65,922, ,783,182 38,161,624 38,161, ,381,637 Provision for taxation Current tax Deferred tax 65,139,569 51,500,604 13,638, ,953, ,609,426 15,344,297 Net profit after taxation for the year 42,643, ,427,914 Earnings Per Share (EPS) Annual Report

192 Auditor s Report To the Shareholders of AB Securities Limited We have audited the accompanying financial statements of AB Securities Limited which comprise the Statement of Financial Position as at December 31, 2013, Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended and a summary of significant accounting policies and other explanatory information. Management Responsibilities for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Financial Reporting Standards (BFRS) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above give a true and fair view of the financial position of AB Securities Limited as at December 31, 2013 and the results of its operations and its cash flows for the year then ended in accordance with Bangladesh Financial Reporting Standards and comply with the Companies Act 1994, the Securities and Exchange Rules 1987, conditions and regulations issued by the Bangladesh Securities and Exchange Commission and other applicable laws and regulations. We also report that: a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; b) in our opinion, proper books of account as required by law have been kept by the company so far as it appeared from our examination of those books; c) the financial statements dealt with the report are in agreement with the books of account maintained by the company; and d) the expenditure incurred was for the purpose of business of AB Securities Limited. Place: Dhaka Date: February 23, Ahmed Khan & Co. Chartered Accountants Annual Report

193 AB Securities Limited Statement of Financial Position As at 31 December 2013 AnnexL Sources of Fund Shareholders' Equity Share Capital Share Money Deposit Investments Revaluation Reserve Retained Earnings Total Shareholders' Equity Application of Fund ,000, ,000, ,024, ,935, ,960, ,000, ,000, ,980, ,980,372 Non Current Assets Property, Plant & Equipment Preliminary Expenses Investments Current Assets Cash and Cash Equivalents Advances, Deposits & Prepayments Advance Income Tax Other Current Assets Current Liabilities and Provisions Accrued Expenses Provision for Income Tax Other Liabilities Net Current Assets Total Application of Fund Statement of Comprehensive Income For the year ended 31 December 2013 OPERATING INCOME Brokerage Commission Interest Income Investment Income Other Operating Income OPERATING & OTHER EXPENSES Operating Expenses Other Financial Expenses Depreciation on Property, Plant & Equipment Profit Before Provision PROVISION For Diminution in Value of Investments Profit Before Taxation Provision for Taxation Current Tax Deferred Tax Net Profit After Taxation Earnings Per Share (EPS) 12,336, ,898 12,645, ,743, ,038,763 2,886,577 57,980,872 1,134,569,505 1,430,475,717 26,068,738 60,416,534 1,062,419,687 1,148,904, ,570, ,960, ,743,407 51,560,311 22,674,879 76,744 2,431,473 60,199,598 49,204,099 5,706,171 5,289,328 16,543, ,795 15,920,013 12,829,631 14,473,969 (1,644,338) 3,090, ,583, ,790 18,201,325 67,495, ,301,459 3,772,681 78,137,933 1,098,623,504 1,297,835,577 1,462, ,674, ,414, ,551, ,283, ,980, ,661,482 63,805, ,551, ,905 1,946,917 50,241,298 43,791,759 1,142,044 5,307, ,420,184 12,003, ,416,398 46,395,043 45,942, ,478 63,021, Annual Report

194 Auditor s Report To the Shareholders of CashLink Bangladesh Limited We have audited the accompanying consolidated financial statements of CashLink Bangladesh Limited and its subsidiary (the Group ) namely Electronic Transactions Network Limited which comprise the Consolidated Statement of Financial Position as of 31 December 2013, and the Consolidated Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended and a summary of significant accounting policies and other explanatory information. Management Responsibilities for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Bangladesh Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group referred to above give a true and fair view of the financial position of Cashlink Bangladesh Limited and its subsidiary as of 31 December 2013 and of their financial performance and cash flows for the year then ended in accordance with Bangladesh Financial Reporting Standards and comply with the Companies Act 1994 and other applicable laws and regulations. We also report that: (a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verification thereof; (b) proper books of account as required by law have been kept by the Group so far as it appeared from our examination of those books; and (c) the Group s consolidated statement of financial position and consolidated statement of comprehensive income dealt with by the report are in agreement with the books of account and returns. Dated, 12 March 2014 ACNABIN Chartered Accountants Annual Report

195 Cashlink Bangladesh Limited and its Subsidiary Consolidated Statement of Financial Position As at 31 December 2013 AnnexM ASSETS Non Current Assets Property, Plant and Equipment Intangible Assets Total Non Current Assets Current Assets Cash & Bank Balances Investment in Share Advance, Deposit & Prepayment Advance Tax Accounts Receivable Total Current Assets Total Assets EQUITY AND LIABILITIES Equity Share Capital Share Money Deposit Retained Loss Total Equity Liabilities NonCurrent Liabilities Long Term Loan Current Liabilities Accrued Expenses Accounts Payable VAT Deducted at Source Provision for Taxes Short Term Loan from Bank Total Current Liabilities Total Liabilities Total Equity and Liabilities ,144,637 5,219,071 10,363,708 8,057,832 24,571,230 3,452,502 22,844,543 10,569,916 69,496,023 79,859, ,000,000 4,200,000 (442,254,776) (200,054,776) 9,742, , ,731 1,301, ,241, ,172, ,914,501 79,859, ,396,101 31,126,688 58,522,788 5,670,009 26,932,725 2,399,441 17,571,462 3,316,751 55,890, ,413, ,000,000 4,200,000 (489,608,853) (247,408,853) 9,742,006 7,850,399 60, , , ,241, ,080, ,822, ,413,174 Consolidated Statement of Comprehensive Income For the year ended 31 December 2013 Revenue Less: Operating Expenses General and Administration Expenses Net Operating Profit / (Loss) Add: Other Income Net Profit / (Loss) Less: Financial Expenses Other Expenses Net Profit/(Loss) before tax Income Tax Expenses Net Profit/(Loss) after Tax ,208,939 53,547,740 4,961,567 46,699,631 1,187,352 47,886, ,886, ,981 47,354, ,372,417 85,677,585 26,240,677 (69,545,844) 18,078,002 (51,467,843) 328,748 1,185,548 (52,982,139) 318,963 (53,301,101) Annual Report

196 Auditor s Report To the Shareholders of AB International Finance Limited We have audited the financial statements of AB International Finance Limited ("the Company") set out on pages 5 to 17, which comprise the statement of financial position as at 31 st December, 2013, and the statement of changes in equity, statement of income and retained earnings and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Directors Responsibility for the Financial Statements The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with the Hong Kong Financial Reporting Standard for Private Entities issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility toward or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the state of the Company's affairs as at 31st December, 2013, and of its profit and cash flows for the year then ended in accordance with the Hong Kong Financial Reporting Standard for Private Entities and have been properly prepared in accordance with the Hong Kong Companies Ordinance. T. o. Yip & Co. Limited Certified Public Accountants (Practising) Hong Kong Samuel Ming Sum Yip Practising Certificate Number: P05704 Date: 18 th February, 2014 Annual Report

197 AB International Finance Limited Balance Sheet As at 31 December 2013 AnnexN NONCURRENT ASSETS Property, plant and equipment HK$ 29, HK$ 48,854 CURRENT ASSETS Discounted bills receivable Deposits, prepayments and other receivable Tax refundable Cash and bank balances CURRENT LIABILITIES Accrued liabilities and other payables Deferred interest income Provision for long service payments Due to ultimate holding company Tax payable NET CURRENT ASSETS EQUITY Share capital Retained earnings Proposed final dividend Capital Reserve 152,565, , , ,408,516 5,140,470 1,136, , ,596, , ,827,959 20,580,557 20,610,407 1,000, ,904 11,484,544 7,561,959 20,610, ,083, ,128 87,805 4,012, ,993,637 4,464,774 1,554, , ,205, ,709,787 18,283,850 18,332,704 1,000, ,904 9,206,841 7,561,959 18,332,704 Profit and Loss Account For the year ended 31 December HK$ 2012 HK$ Interest income Interest expenses Net interest income Other operating income Total operating income Staff costs Depreciation Provision for long service payments Other operating expenses Total operating expenses Profit before taxation Income tax Profit for the year Retained earnings at start of the year Dividends Retained earnings at the end of the year 10,122,298 (1,455,857) 8,666,441 9,385,744 18,052,185 (1,896,930) (24,641) (14,942) (2,368,906) (4,305,419) 13,746,766 (2,262,222) 11,484, ,904 (11,484,544) 563,904 8,151,868 (1,094,387) 7,057,481 7,981,768 15,039,249 (1,806,778) (25,158) (18,677) (2,175,113) (4,025,726) 11,013,523 (1,806,682) 9,206, ,904 (9,206,841) 563,904 Annual Report

198 Auditor s Report To the shareholders of AB EXCHANGE (UK) LIMITED We have audited the financial statements of AB EXCHANGE (UK) LIMITED for the year ended 31 December 2013 set out on Page 6 which comprise the Profit and Loss Account, the Balance Sheet and related notes. Theses financial statements have been prepared under the accounting policies set out therein and the requirements of the Financial Reporting Standard for Smaller Entities (effective April 2008). Respective responsibilities of the directors and auditors The directors responsibilities for preparing the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors Responsibilities. Our responsibility is to audit the financial statement in accordance with the relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the relevant financial reporting framework and whether the financial statements have been prepared in accordance with Companies Act We also report to you whether in our opinion the information given in the Directors Report is consistent with the financial statements. In addition we report to you if, in our opinion, the company has not kept adequate accounting records, if we have not received all the information and explanation we require for our audit, or if disclosures of directors benefits and remuneration specified by law are not made. We read the Directors Report and consider the implications for our report if we become aware of any apparent misstatements within it. Scope of the audit of the financial statements We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practice Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant and judgments made by the directors in the preparation of the financial statements, and whether the accounting policies are appropriate policies of the company s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion on financial statements In our opinion: the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice applicable to Smaller Entities, of the state of the company s affairs as at year ended 31 December 2013 and its Loss for the year then ended; the financial statements have been properly prepared in accordance with Companies Act 2006; and the information given in the Director s Report is consistent with the financial statements. Opinion on the other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors Report for the financial year which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: 1. adequate accounting records have not been kept, or returns adequate for our audit have not been received from the branches not visited by us; or 2. the financial statements are not in agreement with the accounting records and returns; or 3. certain disclosures of directors remuneration specified by law are not made; or 4. we have not received all the information and explanations we require for our audit; 5. the directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies exemption in preparing the directors report. Ekow Appiates (Senior Statutory Auditor) For and on behalf of Appiatse & Associates Chartered Certified Accounts and Registered Auditors 191 Waltham Way London E4 8AG Annual Report

199 AB Exchange (UK) Limited Balance Sheet As at 31 December 2013 AnnexO FIXED ASSETS Tangible Assets Current Assets Debtors Cash at Bank and in Hand Creditors Amounts falling due within one year Net Current Assets/(Liabilities) Total Assets less Current Liabilities GBP 55,434 55,434 10,515 34,028 44,543 (25,993) 18,550 73, GBP 81,876 81,876 10,457 34,055 44,512 (52,698) (8,186) 73,690 CREDITORS Amounts falling due after more than one year Net Assets CAPITAL AND RESERVES Called up share capital Profit and loss account SHAREHOLDERS' FUND (50,000) 23,984 23, ,000 (276,016) 23,984 (50,000) 23,690 23, ,000 (226,310) 23,690 Profit and Loss Account For the year ended 31 December GBP 2012 GBP Turnover Gross Profit Administrative expenses Operating Loss Loss on ordinary activities before taxation Tax on loss on ordinary activities Net Loss 47,327 47,327 (97,033) (49,706) (49,706) (49,706) 22,976 22,976 (119,336) (96,360) (96,360) (96,360) Annual Report

200 Auditor s Report To the Shareholders of Arab Bangladesh Bank Foundation Report on the Financial Statements We have audited the accompanying financial statements of the Arab Bangladesh Bank Foundation, which comprise the Statement of Financial Position as of 31 December 2013 and the related Statement of Comprehensive Income, statement of Changes in equity and Statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Financial Reporting Standards (BFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of the material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors considers internal control relevant to the entity s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used ant the reasonableness of accounting estimates made by management, as well as evaluating the presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion the financial statements presents fairly, in all materials respects, the financial position of Arab Bangladesh Bank Foundation as of 31 December 2013 and its financial performance and its cash flows for the year the ended in accordance with Bangladesh Financial Reporting Standards and comply with the applicable sections of the Companies Act 1994, Securities and Exchange Rules 1987 and other applicable laws and regulations. We also report that: a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of the purposes of our audit and made due verification thereof; b) in our opinion, proper books of accounts as required by law have been kept by the Foundation so far as it appeared from our examination of those books; c) the Foundation s Balance Sheet and Income Statement dealt with by the report are agreement with the books of accounts. Date: 25 February 2014 Dhaka, Bangladesh Zahir Ahmed & Co. Chartered Accountants Annual Report

201 Arab Bangladesh Bank Foundation Statement of Financial Position As at 31 December 2013 AnnexP Sources of Funds Shareholders' Equity Share Capital Retained Earnings Total Shareholders' Equity 20,000, ,724, ,724,412 20,000, ,853, ,853,789 Application of Funds Fixed Assets less accumulated depreciation 13,543,492 13,543,492 Current Assets, Loans and Advances Balance with other Bank Other current assets Advances, deposit and prepayment Accrued interest on FDR Accrued interest on Investment in ABSL Less: Current Liabilities and Provisions Liabilities for expenses Other Liabilities Provision for Tax Net Current Assets Total Application of Fund 52,474, ,000, ,262, ,726 24,500, ,180, , , ,297, ,999, ,180, ,724,412 94,147, ,000,000 54,608,221 1,026, ,782, , ,533 81,775,383 82,472, ,310, ,853,789 Statement of Comprehensive Income For the year ended 31 December Income Interest Income Other Operating Income 56,485,280 56,485,280 51,231,967 51,231,967 Less: Operating and Other Expenses Operating Expenses Financial Charge Other Expenses Depreciation on Fixed Assets Profit before Tax 7,092, ,650 11,157 6,635,476 49,392,997 12,974, ,100 12,167 12,572,975 38,257,725 Provision for Taxation Current Tax Profit after taxation 18,522,374 30,870,623 14,346,647 23,911,078 Annual Report

202 Name of the Directors and entities in which they had interest As at 31 December 2013 AnnexQ Sl. No Name Mr. M. Wahidul Haque Mr. Salim Ahmed Mr. Feroz Ahmed Mr. M. A. Awal Mr. Shishir Ranjan Bose, FCA Mr. Faheemul Huq, BarristeratLaw Mr. Syed Afzal Hasan Uddin, BarristeratLaw Mr. Gholam Sarwar Mr. Md. Mesbahul Hoque Mr. Md. Anwar Jamil Siddiqui Mr. B.B. Saha Roy Dr. M. Imtiaz Hossain Mrs. Runa Zakia Sahrood Khan Mr. M. Fazlur Rahman Chairman Status ViceChairman Director Director Independent Director Director Director Director Director Director Director Depositor/Independent Director Depositor/Independent Director President & Managing Director Name of Firms / Companies in which interested as propriotor/partner/director/managing agent/guarantor/employees etc Chairman: 1) 2) AB Investment Limited 3) AB Securities Limited 4) Cashlink Bangladesh Limited 5) AB Exchange (UK) Ltd., London, UK. Managing Director: 1) Deundi Tea Company (UK) Ltd. 2) Noyapara Tea Co. Limited. 1) Super Refinery (Pvt.) Ltd. 2) Elite Super Plastic Ind.(pvt.) Ltd 3) Super Sea Fish (Pvt.) Ltd. 4) Super Share & Securities Ltd. 5) Elite Properties Management Ltd. 6) Elite Paint & Chemical Industries Ltd. 7) Hexagon Chemical Complex Ltd. 8) Elite International Ltd. 9) Supertel Limited 10) AB Securities Ltd. 11) AB Investment Limited 1) AB internaltonal Finance Ltd., Hongkong as Chairman, Nomnated by AB Bank Ltd. 2) Hexagaon Chemical Complex Ltd. 3) Elite Chemical Ind. Ltd. 4) Elite International Ltd 5) Ahemd Securities Services Ltd. 6) Universal Shipping & Trawling Company 7) Bangladesh Generel Insurance Company Ltd. 8) Holy Crescent Hospital AB International Finance Ltd, Hongkong, as Director Nominated by AB Bank Ltd. 1) S.R. Bose & Co.Chartered Accountants as Proprietor 2) AB Securities Ltd.as Indepandent Director. 3) Cashlink Bangladesh Ltd.as Independent Director 4) AB Exchange (UK)as Independent Director 5) Therapeutics (Bangladesh) Ltd As Independent Director (Nominated by AB Bank Ltd. for Sl. No. 2,3&4) N/A 1) AB Exchange (UK) Ltd.As nominee Director 2) Millennium Aviation Ltd.As nomineedirector 3) Managewell Holdings Ltd. 4) Managewell Investment Ltd. 5) Managewell Communication Ltd. 6) Managewell Services Ltd. 7) Managewell Media Ltd.As nominee Director 8) Hyundai Automobiles Bangladesh Ltd.As nominee Director 9) Forwardair Avation Ltd.As nominee Director N/A Reptiles Firms Ltd. 1) Pacific Motors Limited, Director. 2) Therapeutics Bangladesh Ltd, Director 1) Elite Paint & Chemical Industries Ltd 2) Hexagon Chemical Complex Ltd 3) Elite International Ltd. AB Investment Ltd.as Indepandant Director (Nominated by AB Bank Ltd.) AB International Finance Ltd. Hongkongas Independent Director (Nominated by AB Bank Ltd.) Friendship NGO as Executive Director N/A Annual Report

203 CITIZEN CHARTER

204 Corporate Social Responsibility The role of business worldwide and specifically in the developed economies has evolved over the last few decades from classical profit maximizing approach to a social responsibly approach, where businesses are not only responsible to its stockholders but also to all of its stakeholders in a broader inclusive sense. One can identify so many reasons for shifting the role of business from classical concept to a responsible business concept, but negative impression of stakeholders on the enterprise would get a higher priority among others. In one hand, enterprises create wealth and job opportunities for the society and on the other, they pollute and destroy environment and ecology with devastating impact on human health and biodiversity worldwide. To address the social problems or the problems of the stakeholders, the business community evolved a new approach in their business strategies named CSR and through CSR enterprises intent to strike a balance between economic and social goals, where resources are used in a rational manner and social needs are be addressed responsibly. CSR can be viewed as a comprehensive set of policies, practices, and programs that are integrated into business operations, supply chains, and decision making processes throughout the company and include responsibilities for current and past actions as well as adequate attention to future impacts. CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis. Social responsibility means not only fulfilling legal expectations, but also going beyond compliance and investing more into human capital, the environment and in rapportbuilding with stakeholders. CSR has some internal dimensions such as: human resources management, health and safety at work, adaptation to change and management of environmental impact and natural resources. The external dimensions include local communities, business, partners, suppliers and consumers, human rights and global environmental concerns. Again, CSR may be as simple as sponsoring social service oriented entertainment events. In essence, CSR is positive rapport with the society. AB Bank is always committed to the cause of the society. AB is increasing depth and diversity of CSR engagements both in direct budgetary expenditure and financial inclusion drives, in greening internal practices & processes and in lending to environmentally benign projects. CSR initiatives of AB in 2013 continued focus on i) Promotion of health, education and culture/recreational activities for advanced and wellbeing underprivileged population segments ii) emergency relief in humanitarian distress iii) Art & culture preservation iv) Sports Arena v) financing in and promotion of environment friendly projects vi) financial inclusion of less privileged population segments. ABBL & Employees: With the broader objective of the Bank, Human Resources have been playing a significant role in line with its strategy to support sustainable and consistent business emphasizing the core values of the Bank. AB Bank believes, in an environment where technology, business models create a level playing field and people factor and the organization culture become the key differentiator in achieving business excellence. The Board of Directors and the Management of AB Bank always extend continuous support in conducting training programs which certainly facilitates excellence in Banking through development of attitude, knowledge and skill of the Bank s officials. AB Bank s HR strategy is aimed at ensuring sustainable growth in business, steady and stable value creation for our Customers, Shareholders, Employees and the Society. AB Bank spread awareness towards health and safety begins right from its daily working environment. Ensuring employee & their immediate family health care services, Bank has already linked with two renowned hospitals. These agreements will benefit the employees with medical bill discounts, customized health checkups and health awareness program. AB contributed BDT 1.33 million in 2013 to its employees as health assistance in Market Environment: AB Bank has set credit extension policies for industries in various sectors with emphasis on environmental compliance requirements. Safety and waste disposal standard norm is one of the deducing factors for credit extension to Steel, ReRolling mills and other types of manufacturing concerns. In respect to trade finance for Fertilizers, Chemicals etc adherence to the respective regulatory certification and storing condition is mandatory prior to extension of credit or service support. Prior to approving financing for projects, Officers of the Bank visits the project sites in order to assess and evaluate their impact on environment. Also appraisals are carried out on the prospective project to ascertain the degree of pollution, if any, while evaluating and granting of industrial loans by the Bank. The Bank ensures that clients obtain the necessary environmental clearance (ETP clearance from DoE) as and when required. AB Bank encourages ETP models and prefers giving loan to environment friendly sector, such as solar energy sector.ab Bank does not provide loan in such sectors which harms the environment such as traditional Brick fields. Contribution to National Exchequer AB Bank has contributed significantly to the Government effort in collection of Revenue. As per law, Bank deducts at source Income Taxes & VAT and deposits the same to the Govt. Treasury. Besides, Bank also pays Income Tax on its earnings. Total Payment to Govt. Treasury during 2013 is given below: Particulars Income Tax (Tax on Banks earnings & Source Deduction) VAT( VAT on Banking Service & Source Deduction) Excise Duty Total Amount in Crore BDT Annual Report

205 Corporate Social Responsibility Standing beside the families affected by BDR Tragedy The loss of lives in the BDR carnage shocked the entire nation. AB pledged to provide financial assistance of BDT 4.80 lakhs per year to one of the affected families for a period of 10 years starting from AB Bank Provided donation on Prime Minister s Fund to help the victims of Rana Plaza Head of GSSP Mr. MahbubESobhani Sikder and Corporate Affairs InCharge Ms. Tania Sattar of AB Bank handing over a symbol blanket to Mr. A.F.M Asaduzzaman, General Manager, Bangladesh Bank has recently distributed blankets as warm clothes to help and stand beside the deprived population affected by the fierce winter. Under the Corporate Social Responsibility Program; AB Bank Ltd distributed 18,500 pieces of blankets throughout the country. AB Bank also donated blankets through Bangladesh Bank to the winter effected people. Honorable Prime Minister of Bangladesh Sheikh Hasina receiving the donation from the Directors of AB Bank Mr. B. B. Saha roy and Barrister Syed Afzal Hasan Uddin AB Bank provided donation on Prime Minister s Fund to help the victims of Rana Plaza. Members of AB Bank Board of Directors Syed Afzal Hasan Uddin and B. B. Saha Roy handed over the cheque of BDT 2 Crore to the Honorable Prime Minister of Bangladesh Sheikh Hasina. Support to Educational Institutes AB Bank is always committed to the development of the society. AB provide support for the education of the special children. AB Bank joins hand with Autism Welfare Foundation for helping autistic children AB Bank distributes warm clothes among poor people Managing Director of Mr. Shamim Ahmed Chaudhury attended a workshop for Autistic children as Special Guest organized by Autism Welfare Foundation Warm Cloth distribution by AB Bank where Executive Director of Bangladesh Bank Mr. M. Mahfuzur Rahman was the Chief Guest AB Bank as part of Corporate Social Responsibility contributes for the disabled/autistic people of the society. As part of their contribution AB Bank is working with Annual Report

206 Corporate Social Responsibility Autism Welfare Foundation (AWF) for couple of years. AWF is dedicated for the development of autism, arranges training and education for autistic children to enable them to be selfsupporting. AB contributed BDT 2.45 million to support continuous and smooth functioning of the organization. AB Bank joins hand with Autism Welfare Foundation (AWF) for the following initiatives: Children below the age of 3 years Joined Hands with PROYASH PROYASH is an institute run under the patronization of Bangladesh Army for wellbeing of children with special needs and disability. The motto of the institute is Special Child Special Right. The vision of the institute is to emerge as a centre of excellence with multidimensional activities with the objectives to explore and develop to the fullest, the potential of each individual with special needs and integrate them with the society. AB contributed BDT 0.50 million to PROYASH for fund raising events for autistic & disabled children. Support in Sports Arena: AB Bank sponsored the AB Bank1st DRMC National Language festival 2013 AB is always extending hand for support in sports arena. The Bank also arrange inhouse cricket match and attend Corporate Cricket league to motivate its employees towards sport. AB Bank sponsored President Cup Golf Tournament Managing Director of Mr. Shamim Ahmed Chaudhury distributed prizes and certificates among the participants of AB Bank1st DRMC National Language festival 2013 along with Dr. Kamal Abdul Naser Chowdhury, Secretary, Ministry of Education. AB Bank1st DRMC National Language festival 2013 was organized by Dhaka Residential Model College recently at their College Auditorium. Dr. Kamal Abdul Naser Chowdhury, Secretary, Ministry of Education attended the function as Chief Guest. Additional Managing Director of Mr. Shamim Ahmed Chaudhury attended the function as Special Guest and distributed prizes among the participants. The prime objective of the festival was to promote the students to be interested in language and literature. Around 4000 students of different schools participated in the language festival. Among others Principal of Residential Model College Colonel Md. Musleh Uddin Bhuiyan was also present at the prize giving ceremony. AB contributed BDT 2.49 lakh to support the event. Mr. Shamim Ahmed Chaudhury, Managing Director of AB Bank Ltd. along with other executives of the Bank inaugurated the AB Bank 23rd President Cup Golf Tournament. AB Bank 23rd President Cup Golf Tournament, amid much enthusiasm and festivity, took place at the Bhatiary Golf & Country Club. All most 150 golfers took part in the event which was sponsored by. On the prize distribution ceremony, Major General Sabbir Ahmed, ndc, psc General Officer Commanding 24 Infantry Division & Senior Vice President Bhatiary Golf & Country Club, gave away prizes among the winners as Chief Guest. As special guest, Shamim Ahmed Chaudhury, Additional Managing Director of AB Bank Ltd. along with other executives of the Bank was also present on the occasion. AB contributed BDT 0.50 million for the celebration. Annual Report

207 Corporate Social Responsibility Art & Culture: AB Bank believes art and culture are the essence of a nation. We are passionate about our art & culture. For long AB has been patron of arts, literature and culture. AB Sponsored the "Borsho Biday O Hazaro konthe Borsho Boron 1420" by ChannelI contributed BDT 1 million for "Borsho Biday O Hazaro konthe Borsho Boron 1420" a program for celebrating the Bengali new year by ChannelI. Financial Support to Hay Festival Dhaka contributed BDT 1.1 million to Hay Festival of Literature & Arts Limited for Literary Festival Hay Festival Dhaka to promote our rich Bengali literacy heritage as well as our newer English writing in Bangladesh. AB Sponsored the Publication of "Shishu Kishor Sonkolon" by Chandrabati Academy contributed BDT 1.65 million for the publication of "Shishu Kishor Sonkolon" by Chandrabati Academy a story collection for the children. AB Bank sponsored the Golden Jubilee Celebration of Jhenidah Cadet College Finance Minister of Bangladesh Mr. Abul Maal Abdul Muhith along with the Information Minister of Bangladesh Mr. Hasanul Haq Inu, the Chairman of Mr. M. Wahidul Haque and many others inaugurated the Golden Jubilee Cerebration of Jhenidah Cadet College. Jhenidah ExCadets Association (JEXCA) an Alumni organization of Excadets of Jhenidah Cadet College had under taken exclusive celebration programs on the Golden Jubilee Cerebration of Jhenidah Cadet College. AB Bank joined hands with JEXCA to celebrate the Golden Jubilee of Jhenidah Cadet College. The Bank was the Platinum Sponsor of the event. Many ExCadets from every batch attended the program to celebrate this occasion. The program was inaugurated by the Finance Minister of Bangladesh Mr. Abul Maal Abdul Muhith along with the Information Minister of Bangladesh Mr. Hasanul Haq Inu, the Chairman of Mr. M. Wahidul Haque and many others. The two day long program was filled with exciting events like March past of current students, Cultural night etc. AB contributed BDT 2.95 million for the celebration. Annual Report

208 Green Banking Green Banking Activities Phase 1: Policy Formulation and Governance: Banks have started Environmental Risk Rating (EnvRR) since July Banks have done environmental risk rating in 2986 projects in AB Bank has been amongst the top ten Banks in EnvRR during [Source: Annual Report on Green Banking 2012, Bangladesh Bank] 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% SIBL, 7.23% Top Ten Banks in EnvRR during 2012 AB Bank IFIC St. Chart, 5.22% UCBL, 5.62% AB Bank 6.43% St. Chart Bank Aisa SIBL EBL, 4.82% BRAC Basic Shahjalal Exim Jamuna One Dhaka IBBL, 19.68% Incorporation of ERM in CRM Eco friendly business activities and energy efficient industries are given preference in financing by the Bank. Environmental infrastructure such as wastewater treatment plant, biogas plant, biofertilizer plants are encouraged and financed by the Bank. Besides, projects having such installations are encouraged. Bank has incorporated Environmental and Climate Change Risk as part of the existing credit risk methodology and introduced Environment Due Diligence Checklist to assess existing as well as a prospective borrower (Credit Circular No.09/2011 in June, 2011). InHouse Environment Management We have introduced Green Office Guide (Green Tips) to better manage InHouse Environment. Brief Particulars of Green Office Guide is as under: As per the above guide: water, paper, electricity, energy etc. in its offices and branches in different places paper consumption communication is extensively used (where possible) for office management automatic shutdown of computers, fans, lights, air coolers etc. Sonali, 9.64% Exim, 17.67% Slogan of Green Banking in AB REDUCE, REUSE AND RECYCLE REDUCE & REUSE Rupali, 10.40% HSBC, 13.65% Top Ten Banks in utilization of climate Risk Fund during 2012 Green Banking Activities AB Bank has adopted comprehensive Green Banking Policy in line with global norms BRPD Circular no. 02 Dated February 27, 2011 on Policy Guidelines for Green Banking (as approved by Board of Director s 488th Meeting held on ). Accordingly, responsibility of designing, evaluating and administering related Green Banking issues of the bank has already been formed comprising with 7 (Seven) Senior Officials from AB Head Office and Branches. As per Bangladesh Bank Guidelines AB Bank has already implemented the 1st Phase of Green Banking practicing the same. Implementation of 2nd phase is under process. Every ton of paper saves 17 trees. sides would shrink the document by about 10% of paper. service reasons wherever possible rather than write to you & payment through Card) not required), and maintaining the temperature of the AC at 22 Degree Celsius; Annual Report

209 Green Banking hour Green Monitor To Ensure Optimum consumption of Electricity and Water, Head Office and all Branches of the Bank is set to reduce electricity consumption. To this effect, To this effect, One Officer for each ABBL Floor (at HO as well as at each Branch) has been nominated as Green Monitor who ensure that: during office hours. lights are put off when not required. wash and rest rooms especially due to faulty bib cock). from 12:00 Midnight to 6:00 am Earth Hour Introduction of Earth Hour in every Branch and at Head Office: To save electricity and to promote the environmental cause effectively, every ABBL Branches switch off Air Coolers of the branches as well as the unnecessary lights for 1 (one) hour every Sunday from 3:00 p.m. to 4:00 pm branch is shown mentioning the time schedule and the very purpose of the same. CREATION OF CLIMATE RISK FUND Bank to allocate Climate Risk Fund for CSR activities for the people affected by climate change like severe winters which we have seen in last few years. GREEN MARKETING To promote Green marketing Bank is arranging Training & Capacity Building. ONLINE BANKING customers to use Online banking for transactions. help environment by eliminating paper waste, saving gas and carbon emission, reducing printing costs and postage expenses. Supporting Employee Training, Consumer Awareness and Green Event In June, 2013 workshops were arranged for officials as well as customers of our Chittagong region Branch to create awareness of Green Banking. Earth Hour (Green Event) is practiced which also makes our customers aware. Disclosure and reporting of Green banking Such disclosure has been done in our Annual Report, Bank s periodicals while our websites speaks of our Green Products. Implementation of PHASE II of Green Banking is under process: and will completed by December 31, The plan shall include: approved) Management Plan and guidelines Annual Report

210 AB Events2013 Annual Report

211 AB Events2013 Annual Report

212 LOCAL NETWORK

213 Branch Network SL No Branch Name Address SL No Corporate Branches (2 Branches) 1 2 Motijheel Principal BSB Building, 08 DIT Avenue, Dhaka 3031, Dilkusha C/A, Dhaka 1 2 Dhaka Region1 (17 Branches) Banani Bandura Bhairab Bazar Board Bazar Comilla Kakrail Karwan Bazar Madhabdi Malibagh Mirpur Mohakhali Mymensingh Jinjira Nawabpur Progoti Sharani Rokeya Sharani Tangail Dhaka Region2 (16 Branches) Ashugonj Brahmanbaria Chandra Chandpur Dhanmomdi Gulshan Imamgonj Islampur Joypara Narayanganj New Elephant Road North South Road Pagla Savar Shyamoli Uttara Chittagong Region1 (12 Branches) Agrabad Choumuhani Dewanhat EPZ Feni Hathazari Jubilee Road Nazumeah Hat Port Cont. Road Patherhat Sitakunda Station Road S.R.R. Commercial Tower, Plot#50, Road#11, Block#C, Ward#19, Police StationBanani, Dhaka Bandura Govt. Super Market (1st floor) Hasnabad, Nawabgonj, Dhaka 248 (W) Tin Potty, Bhairab Bazar, Bhairab, kishoregonj Union: Gacha, PO: National University, PS: Gazipur Sadar, Gazipur Mogholtooly Super Market (1st Floor), Mogholtooly Road, Comilla 81, VIP Road, Dhaka1000 BSEC Bhaban, 102 Kazi Nazrul Islam Avenue, Dhaka1215 Parkashipur, Madhabdi Bazar, Narsingdi Advanced Melinda (Level1) 72, Malibagh, Dhaka1219 5/A, 5/B, Darus Salam Main Road (1st floor), Section 1, Mirpur, Dhaka Pacific Centre (1st Floor), 14 Mohakhali C/A, Dhaka Dr. Bipin Sen Road, Choto Bazar, Kotowali, Mymensingh Hazi Karim Market, Purba Aganagar, Gudara Ghat Road, Keranigonj, Dhaka , Nawabpur Road (Nawabpur Tower), Nawabpur, Dhaka1100 N.R. Tower, 72 Progoti Sharani, BlockJ, Baridhara, Dhaka 923, Shewrapara Rokeya Sharani, Mirpur, Dhaka 702 Sabur Khan Tower, Kalibari Road, Tangail Sadar, Tangail Kashem Plaza, Ashugonj Sadar, Brahmanbaria. 1090/5321, Court Road, Brahmanbaria Alhaj Khabiruddin Super Market (1st floor), Kaliakori Bazar, Poura Shava, Kaliakair, Gazipur Holding No.123/115 Kalibari Pouro New Market, Chandpur Sadar, Chandpur Plot: 45 (new), 286/B (old), Road:16 (new), 27 (old), Dhanmondi R/A, Dhaka1209 Ventura Avenue (1st & 2nd floor) Plot.#CWN ( C )8, Road#34, Gulshan2, Dhaka , Imamganj, Dhaka 3839, Islampur, Dhaka Dohar, Dhaka 109 B.B Road Narayangonj Novera Square, House 05, Road 02, Dhanmondi, Dhaka /1 North South Road (Bangshal), Dhaka 1100 Alhaj, Afsar Karim Bhaban, DN Road, Pagla, Narayanganj Palash Bari, Baipal, Savar, Dhaka Shyamoli Square, (Level 1 &2) Holding#24/1 & 24/2, Plot#23/8B & 23/8C, BlockB, Khilji Road, Ward#45, Mohammadpur, Dhaka House: 11, Road: 14D, Sector: 4, Uttara, Dhaka BCIC Sadan, 26, Agrabad C/A, Chittagong 886, Feni Road, Chaumuhani, Begumganj, Noakhali 315, Dewan Chamber, Dewanhat, Doublemuring, Chittagong. Bay Shopping Centre, P.O. EPZ, South Halishahar, P.S., Bandar, Chittagong Haque Plaza (1st Floor), 193, SSK Road, Feni Hajee Siddique Market (1st floor), Hathazari Bus Stand, Hathazari, Chittagong 175, Jubliee Road, Enayet Bazar, Chittagong Burischar, Kaptai Road, Hathazari, Chittagong 5, Port Connecting Road, Block G, Barapole, Halishahar, Chittagong Khayez Shopping Center (2nd floor), Patherhat, Noyapara, Chittagong Aziz Shopping Complex, Mohadevpur, Chittagong 86 Station Road, Nupur Market, Chittagong Annual Report

214 Branch Network SL No 9 Sirajgonj 87 Islami Banking 1 Branch 1 Islamic BankingKakrail 82, Kakrail, Ramna, Dhaka 88 Overseas Branch1 Branch Liberty Building, 4142, Sir Vithaldas Thackersey Marg, New Marine Lines 1 Mumbai Branch 89 Mumbai400020, India Overseas Subsidiaries 1 2 Branch Name Address SL No Chittagong Region2 (14 Branches) Khatunganj Anderkilla Chawk Bazar Bahaddar Hat Boalkhali CDA Avenue Cox's Bazar Chakaria Khulshi Lohagara Pahartali Teknaf Sandwip Chaturi Sylhet Region10 Branches Boroikandi Chhatak Dargah gate Garden Tower Madhabpur VIP Road Moulvi Bazar Sreemongal Tajpur Habiganj Khulna Region7 Branches Barisal Benapole Jessore Jhikargacha Khulna Kushtia Satkhira Rajshahi Region9 Branches Bogra Chapai Nawabganj Dinajpur Naogaon Pabna Rajshahi Rangpur Saidpur AB International Finance Ltd. AB Exchange (UK) Ltd. Annual Report , Khatunganj, Chittagong K.M.C Tower (1st Floor), 133, Anderkilla, Chittagong Moti Tower, 67/68 College Road, Chawkbazar, Chittagong 4543, Bahaddarhat, Medina Hotel (1st Floor), Chandgaon, Chittagong TCCA Complex, Gomdandi (East), Boalkhali, Chittagong BMA Bhaban (Gorund Floor), 1367 CDA Avenue, East Nasirabad, Chittagong Digonta Complex (New Market), Bazar Ghata, Cox's Bazar M Rahman Complex (1st floor), Holding No. 625, Ward No. 4, Chakaria, Cox's Bazar Khulshi House, Bungalow No. 2, B2, Road No. 1, Khulshi, Chittagong Mostafa City, Amirabad, Lohagara, Chittagong Abdur Rahim Tower (1st Floor), 972/1043, D.T Road, A.K Khan Gate North Pahartoli, Chittagong Teknaf Main Road, Teknaf, Cox's Bazar Sandwip City Centre, Anam Nahar, Plot No , UnionHaraMia P.S. Sandwip, Chittagong. Al Amin Super Market, Dag No.RS1840/3474, Khatian No. 488 & 106 MouzaChaturi, UnionChaturi, Police StationAnowara, DistrictChittagong. Rongdhonu Biponi Bitan (1st floor) Central Bus Terminal Road, Verthokhola, Sylhet Madaris Mansion, Bagbari, Chattak, Sunamganj Raj Manjil, Dargahgate, Sylhet Biswa Road, Shahjalal Uposhohor Point, Sylhet 3100 Munshi Tower (1st Floor), Madhabpur, Habiganj Surma Tower, Plot No (old), (new) VIP Road, Taltala, Sylhet3100 Shamsher Nagar Road, Choumuhani, Moulvibazar Aziz Super Market, Moulvibazar Road, Sreemangal, Moulvibazar Haji Keramat Ali Super Market, Kadamtala, Tajpur, Sylhet Shayestaganj Main Road,Holding#6286, Ward# 8, Habiganj Monsur Mansion, 101, Sadar Road, Barisal 607 Benapole, Local Bus Stand, Benapole, Jessore 38 M.K. Road, Jessore Hanef Super Market, Holding#567, Word#3, Jessore Benapole Road, Jhikargacha Pourashava, Jessore Mollick Shopping Complex Limited, 99 Khan A Sabur Road, Khulna 1214 Nawab Serajuddowla Road, Boro Bazar, Kushtia 884/810, Abul Kashem Road, Satkhira 324, Kazi Nazrul Islam Sarak, Jhawtala, Bogra 16 Godagari Road, Chapai Nawabganj 189 Zabed Super market, Bahadur Bazar, Dinajpur Mozaffer Hossain Marketing Complex, Main Road, Naogaon A.R. Plaza, Abdul Hamid Road, Pabna , Shaheb Bazar, Rajshahi 9192, Central Road, Kotowali, Rangpur 24, Nur Plaza (1st & 2nd Floor), Ward No. 12, Shaheed Dr. Zikrul Haque Road Saidpur, Nilphamari Friend Plaza (1st floor), S. S Road, Ward 1, Sirajganj Unit 1201B, 12/F, Admiralty Centre, Tower One, 18 Harcourt, Hongkong 69 Whitechapel High Street, London, E1 7PL

215 ATM Network ATM Name Board Bazar Joypara Gulshan Bogra Kakrail (Islami Branch) Dargahgate Garden Tower VIP Road Chattak Tangail Principal Uttara Kakrail Elephant Road Mohakhali Karwan Bazar Progoti Sharani Br Bahaddarhat CDA Avenue Agrabad Patherhat Khatunganj Kalatoli Madhabdi Nazumeah Hat Khulna Bhairab Bazar O.R. Nizam Road Brahmanbaria Benapole EPZ Chandpur Satkhira Naogaon Jessore Sirajganj Midtown Shopping Mall Saidpur Rajshahi Pahartoli Moulovi Bazar Narayanganj Mymensingh Comilla Lohagora Teknaf Sremongal Imamganj Dhanmondi Bangshal Khulshi Boroikandi Boalkhali Momin Road Fakirapool Shantinagar Tajmahal Road Malibagh Arakan Road Rangpur ATM Branch Name Board Bazar Joypara Gulshan Bogra Kakrail Dargahgate Garden Tower VIP Road Chattak Tangail Principal Uttara Kakrail New Elephant Road Mohakhali Karwan Bazar Progoti Sharani Bahaddarhat CDA Agrabad Patherhat Khatunganj Cox's Bazar Madhabdi Nazumeah Hat Khulna Bhairab Bazar CDA Brahmanbaria Benapole EPZ Chandpur Sathkhira Naogaon Jessore Sirajganj Mirpur Saidpur Rajshahi Pahartoli Moulovi Bazar Narayanganj Mymensingh Comilla Lohagara Teknaf Sremongal Imamganj Dhanmondi North South Road Khulshi Boroikandi Boalkhali Andrekilla Motijheel Kakrail Dhanmondi Kakrail Bahaddarhat Rangpur ATM Booth Address Union: Gacha, PO: National University, PS: Gazipur Sadar, Gazipur1704 Joypara, Dohar, Dhaka1300 Ventura Avenue, Plot No. CWN(C)8, Road No. 34, Gulshan Model Town, Gulshan, Dhaka 324, Kazi Nazrul Islam Sarak, Jhawtala, Bogra , V.I.P Road, Kakrail, Dhaka1000 Raj Manjil, Dargahgate, Sylhet3100 Bishwa Road, Shahjalal Uposhohor Point, Sylhet3100 Surma Tower, Plot 6006(old), 27640(new), Ward 13, V.I.P. Road, Taltala P.S:. Kotwali, Sylhet City Corporation, Sylhet4112 Madaris Mansion, Bagbari, Chattak, Sunamganj Sabur Khan Tower, Kalibari Road, Tangail Sadar, Tangail1900 BCIC Bhaban, 3031, Dilkusha C/A, Dhaka1000 House 11, Road 14D, Sector 4, Uttara, Dhaka , VIP Road, Kakrail, Dhaka1000 Novera Square, House 05, Road 02, Dhanmondi, Dhaka1205 Pacific Centre, 14 Mohakhali C/A, Dhaka1212 BSEC Bhaban, 102 Kazi Nazrul Islam Avenue, Dhaka1215 N.R. Tower, 72 Progoti Sharani, BlockJ, Baridhara, Dhaka Bismillah Complex, Arakan Road, Bahaddarhat, Chittagong4323 BMA Bhaban, 1367 CDA Avenue, East Nasirabad, Chittagong4000 BCIC Sadan, 26, Agrabad C/A, Chittagong4100 Khayez Shopping Center, Patherhat, Noyapara, Chittagong 395, Khatunganj, Chittagong4000 Kalatoli, Hotel Motel Zone, Main Road, Cox's Bazar4700 Parkashipur, Madhabdi Bazar, Narsingdi1604 Burischar, Kaptai Road, Hathazari, Chittagong4330 Mollick Shopping Complex Limited, 99 Khan A Sabur Road, Khulna (W) Tin Potty, Bhairab Bazar, Bhairab, Kishoregonj /A, O.R. Nizam Road, Goal Pahar Circle, Chittagong /5321, Court Road, Brahmanbaria Benapole, Local Bus Stand, Benapole, Jessore7431 Bay Shopping Centre, P.O: EPZ, South Halishahar P.S. Bandar, Chittagong /115 Kalibari Pouro New Market, Chandpur Sadar, Chandpur /810, Abul Kashem Road, Satkhira7431 Mozaffer Hossain Marketing Complex, Main Road, Naogaon M. K. Road, Jessore7400 Friends Plaza, S S Road, Ward 1, Sirajganj6700 Plot 22, Main Road 03, Section7, Pallabi, Mirpur, Dhaka , Nur Plaza, Ward 12, Shaheed Dr. Zikrul Haque Road, Saidpur, Nilphamari Shaheb Bazar, Rajshahi , Zakir Hossain Road, Amader Bari, Chittagong Shamsher Nagar Road, Choumuhana, Moulovibazar , B.B Road, Narayangonj 52 Dr. Bipin Sen Road, Choto Bazar, Kotowali, Mymensingh2201 Mogholtooly Super Market, Mogholtooly Road, Comilla3500 Sicho Shopping Complex, Padua, Lohagara, Chittagong4397 Teknaf Main Road, Teknaf, Cox's Bazar4760 Aziz Super Market, Moulvibazar Road, Sremongal, Moulvibazar , Imamganj, Dhaka1211 Plot: 45 (new) 286/B (old), Road: 16 (new) 27 (old), Dhanmondi R/A, Dhaka1209 9/1, North South Road, Bangshal, Dhaka Khulshi House, Bungalow No. 2, B2, Road 1, P.S.: Khulshi, Chittagong4000 Rongdhonu Biponi Bitan, 1st Floor, Central Bus Terminal Road, Verthokhola, Sylhet3100 TCCA Complex, Gomdandi (East), Boalkhali, Chittagong , Momin Road, Chittagong 1/A Fokirapool D.I.T Ext. Road, Dhaka Eastern Point, 89, Shantinagar, Dhaka 3/4, BlockC, Taj Mahal Road, Mohammadpur Dhaka , D.I.T Road, Malibagh, Dhaka 957/1553, Arakan Road, Bahadarhaat, Chittagong 9192, Central Road, Kotowali, Rangpur (Opposite of Rangpur Bangladesh Bank) Live Date 01Jul09 06Oct09 06May10 10May10 07Jun10 14Jun10 14Jun10 14Jun10 15Jun10 16Jun10 20Jun10 23Jun10 24Jun10 24Jun10 28Jun10 28Jun10 29Jun10 29Jun10 29Jun10 30Jun10 01Jul10 01Jul10 04Jul10 12Jul10 12Jul10 12Jul10 13Jul10 13Jul10 13Jul10 13Jul10 14Jul10 14Jul10 14Jul10 14Jul10 15Jul10 15Jul10 17Jul10 18Jul10 21Jul10 26Jul10 26Jul10 27Jul10 27Jul10 29Jul10 03Aug10 15Sep10 15Sep10 21Sep10 22Sep10 26Sep10 26Sep10 26Sep10 27Sep10 31Oct10 04Nov10 04Nov10 07Nov10 10Nov10 11Nov10 11Nov10 Annual Report

216 ATM Network ATM Name Kamlapur Viyellatex Dinajpur Mordern More Bonosree Kushtia Mirpur#1 Proshika More Keranigonj Sabujbagh Nawabpur Wari Station Road Chowhatta Mira Bazar Amtola Naya Bazar Patrail Dream Plaza Malibag Shyamoli New Eskaton Panthapath Feni Royal More Rajshahi Medical College Chakaria Old Satkhira Chapai Nawabganj Puradah Islampur (Gandaria) Madhabpur Thanar More Dewanbazar Uttara3 Farmgate Shewrapara Shi'ah Mosque Patuatoli Zinda Bazar Saidabad Jhinaidah Prince Plaza Monipuripara Bijoy Sharani Khilgaon AK Plaza Bandura Concord Arcadia Pagla Sitakunda Foy's Lake Lama Bazar Rina Monjil Gowsul Azam Jhikargacha Baridhara1 Baridhara2 Subid Bazar Pall Bari Pilkhana ATM Branch Name Principal Board Bazar Dinajpur Dinajpur Progoti Sharani Kushtia Mirpur Mirpur Jinjira Principal Nawabpur Nawabpur Sreemongal Dargahgate Garden Tower Sathkhira Islampur Tangail Jessore Malibag Shyamoli Karwan Bazar Karwan Bazar Feni Khulna Rajshahi Chakaria Sathkhira Chapai Nawabganj Kushtia Islampur Madhabpur Kushtia Chawk Bazar Uttara Karwan Bazar Rokeya Sharani Shyamoli Islampur VIP Road Principal Kushtia Dhanmondi Rokeya Sharani Karwan Bazar Malibagh Uttara Bandura New Elephant Road Pagla Sitakunda Khulshi VIP Road Jessore Uttara Jhikargacha Gulshan Gulshan Dargahgate Jessore New Elephant Road ATM Booth Address 1415, North Kamlapur,Dhaka Viyellatex76/B Satair RSKhototil, Gazipura Bus Stand, Gazipur 189 Zabed Super Market, Bahadur Bazar, Dinajpur Modern More, Ganeshtala, Dinajpur House35, Road2, BlockC, Bonosree, Rampura, Dhaka Serajuddowla Road, Al Amin Super Market, Kushtia House2, Road6, BlockF, Muktijoddah market, Mirpur, Dhaka Plot33, Lane1, BlockB, Section6, Mirpur, Dhaka Chowrasta, Bishwa Road, Keranigonj, Dhaka 78(O), 25(N), Sabujbagh, Biswa Road, Dhaka Bakultala Complex, Folder Street, Nawabpur, Dhaka 216, Nawab Street, Wari, Dhaka Kutum Bari, Station Road, Sreemongal Firoj Tower, Chawhatta, Sylhet Tamabil Road, East Mira Bazaar, Sylhet Amtola, In front of Zilla School, Satkhira Sador, Satkhira Nawab Yousuf Super Market, Naya Bazar, Old Town, Dhaka Patrail, Delduar, Tangail Dream Plaza, 37, Hadi Md Mohsin Road, Jessore Advanced Melinda (Level1), 72 Malibag, Dhaka1219 Shymoli Square, 23/8B & C, BlockB Khilji Road, Dhaka , New Eskaton Road, Romna, Dhaka /2, West Panthapath, Dhaka1215 Haque Plaza(1st Floor), 193 SSK Road, Feni Royal More, Khulna Rajshahi Medical College, Rajshahi M. Rahman Complex (1st Floor), Ward 4, Chakaria, Cox's Bazar Puratan Satkhira Bazar, Asha Suni Road, Satkhira Sador, Satkhira 16 Godagari Road, Chapai, Nawabganj Khan Super Market, Puradah, Kushtia 56 Haricharan Roy Road, Faridabad, Dhaka Munshi Tower (1st Floor), Ward 7, Madhabpur, Habiganj N.S Road Thanar More, Kushtia 82, Nawab Sirajuddowla Road, Chawkbazar, Chittagong House37, Road7, Sector3, Uttara, Dhaka , Kazi Nazrul Islam Avenue, Farmgate, Dhaka , West Shewrapara, Rokeya Sharani Road, Dhaka Shi'ah Mosque, House16, Road1, Mohammadpur, Dhaka , Patuatuli, Hazi Nur Mohammad Road, Dhaka Blue Water Shopping Complex, Zinda Bazaar, Sylhet 17/A, North Saidabad Jatrabari, Dhaka Jhinaidah Road, M. A Razzaq, Kushtia 4/2, Prince Plaza, Sobhanbag, Mirpur Road, Dhaka 20/1, Monipuripara (Sangshad Avenue) Dhaka 242/1/B, Bijoy Sharani Link Road, Tejgaon, Dhaka 425/C, Khilgaon, Dhaka A.K Plaza, Plot1, Road1/B, Sector9, Uttara, Dhaka1230 Bandura Government Super Market, Nawabgonj, Dhaka Concord Arcadia, Plot#122, Road#4, Dhanmondi, Dhaka DN Road Pagla, Fatullah, Narayangonj Aziz Shopping Complex, Sitakunda, Chittagong Concord Amusement World, Foy's Lake, Khulshi, Chittagong VIP Road, Lama Bazar, Sylhet 69, Central Jail Road, Jessore Gowsul Azam Avenue, House#57, Sector#14, Uttara, Dhaka1230 Hanif Super Market, Jhikargacha Baridhara Parishad Office, Baridhara DOHS, Road#5, Opposite to CSD, Dhaka Baridhara Parishad Office, Baridhara DOHS, Road#5, Opposite to CSD, Dhaka Indiana Height, Subid Bazar, Sylhet Pallbari Circle, Beside Royal Community Center, Jessore 57 Azimpur Pilkhana Road, OppThana Education Office, Dhaka Live Date 28Nov10 28Nov10 29Nov10 29Nov10 1Dec10 2Dec10 7Dec10 7Dec10 8Dec10 12Dec10 13Dec10 13Dec10 21Dec10 22Dec10 22Dec10 22Dec10 23Dec10 23Dec10 23Dec10 27Dec10 27Dec10 28Dec10 28Dec10 28Dec10 28Dec10 28Dec10 29Dec10 29Dec10 29Dec10 30Dec10 2Jan11 3Jan11 4Jan11 13Jan11 16Jan11 16Jan11 17Jan11 18Jan11 19Jan11 19Jan11 20Jan11 25Jan11 5Feb11 5Feb11 6Feb11 8Feb11 23Feb11 23Feb11 3Mar11 5Apr11 10Apr11 11Apr11 11Apr11 11Apr11 27Apr11 27Apr11 8May11 8May11 8May11 9May11 12May11 Annual Report

217 ATM Network ATM Name Mohakhali Amtola Zigatola Bokshi Bazar Pabna Tanbazar Khanpur Puro Market Monipuripara2 Gabtoli Mojumdar Merket Chalkbazar Ashuganj Moghbazar Shib Bari Bar House Nathullabad Launch Ghat Grand Huq Tower VIP Tower Dostagir Center Tajpur AlHasan Hotel United Tower Kaderabad Housing Society Lalbag ATM Branch Name Mohakhali New Elephant Road North South Road Pabna Narayanganj Narayanganj Karwan Bazar Shyamoli Feni Imamganj Ashuganj Malibag Khulna Jessore Barisal Barisal Feni Jublee Road Dewan Hat Tajpur Khulna Khulna Dhanmondi New Elephant Road Baipail Savar Boro Moghbazar Malibagh BRRI Board Bazar Kaliakair Super Market Chandra Konabari Bus Stand Chandra Chandra Chawrasta Chandra Paltan Tower Motijheel Vogra Board Bazar PCR Road PCR Uttara14 Uttara Khilkhet Progoti Sharani Ashkona Uttara Green Road New Elephant Road Kochukhet Rokeya Sharani Jublee Road Jublee Road Mukda Para Malibagh Indira Road Karwan Bazar Mirpur#12 Mirpur Uttara#7 Uttara Navarone Benapole Kadirganj Rajshahi BRAC Shopping Uttara Mirpur10 Rokeya Sharani Uttara Uttara Notun Bazar Mymensingh Nawabgonj Bandura Chaumuhani Chaumuhani Segunbagicha Kakrail Kalachandpur Progoti Sharani Amirabad Lohagara Fantasy Kingdoom Savar MDC Square Chawk Bazar Doymair Bazar Tajpur ATM Booth Address Mohakhali, H39, Under Mohakhali Fly Over, Zia International Airport Road, Mohakhali, Dhaka House43/3/2, Zigatola, Dhanmondi, Dhaka Bokshi Bazar, City Corpration Market, Dhaka Medical College, Dhaka AR.Plaza, Ground Floor, Abdul Hamid Road, Pabna 56, SM Maleh Road, Al Jaynal plaza, Tanbazar, Narayanganj 8 No, Khanpur Puro Market, Hospital Market, Narayanganj Lion's Shopping, Old Airport Road, Monipuripara, Dhaka 86, 1st Colony, Mazar Road, Gabtoli, Mirpur, Dhaka Mojumdar Merket, Sadar Hospital Road, Feni 18/1 Water Works Road, Dal Potti, Chalkbazar, Dhaka SA Plot#10 & 12, Main Road, Ashuganj 63/Ka, Maghbazar More, Dhaka B7, Mojit Sharani, Shib Bari, Khulna District Judge Court Bar Association (Bhaban No1), Near Jessore Municipal Eid Ghah Moidan), Mudjib Sarak, Jessore Nathullabad Bus Stand, Barisal Barishal Launch Ghat, Barisal , Grand Huq Tower, Mizan Road, Feni VIP Tower, Kazir Dewri, Chittagong Dostagir Center 31, D.T Road, Chittagong Kazi Mansion, DhakaSylhet High Way, Kadamtola, POTajpur, PSOsmaninagar, Sylhet 144, Sir Iqbal Raod, Khulna 4 KDA, Khulna 41/A, Kaderabad Housing Society, Katasur, Mohammadpur, Dhaka 15, Lalbag Road, Lalbag Kella, Dhaka Other Side of Ashulia Thana (Baipail Police Station, Near Baipail Mosque), RS Plot No181, Dhamsona, Ashulia, Savar, Dhaka 625 BoroMoghbazar, Nayatola, (Opposite Red Cr. Society) Krishi Gobesona Institute, 58/1 58/2 Laksmipura, Chandra, Gazipur. Kaliakair Super Market, Kaliakair Bazar Bus Stand, POKaliakair Bazar, PSKaliakoir, Gazipur Konabari Bus Stand, Gazipur, Plot No A146 & A147(p) Block Chemical, BSCIC, Konabari, Gazipur MaAmina Shopping Complex, Holding No55, Dyenkini, Kaliakoir, Gazipur (Chandra Chawrasta, Gazipur) Shop11, Box Culvert Road, 87 Purna Paltan Road, Paltan Tower, Paltan, Dhaka M.H Tower, Vogra, Gazipur Shah Amanat Shopping Complex, Plot12/A, BlockG, Road No1, Len2, Hali Shahar Housing Estate, Holding No2113/A, Rampur, Chittagong House 20, Road 12, Sector 14,Uttara, Dhaka Concord Lake city, Holding No. Kha 94/3, Khilkhet, Dhaka Hazi Supper Market, Holding No. 2522, Ashkona, Uttara, Dhaka 144, Green Road, Dhaka 234/6, Kochukhet, Mirpur 175, Jubilee Road, Enayet Bazar, Chittagong 111/C, North Mukda Para, Sabujbagh, Dhaka 26, Indira Road, Farmgate, Dhaka Plot No17, Road No02, Block NoE, Section No12, Rupnagar R/A, Mirpur Housing Estate, Mirpur, Dhaka Plot89, Road28, Sector07, Uttara, Dhaka Navarone Bazar, Sharsha, Jessore. 97, Kadirganj, Dorikhorbona, Greater Road, Rajshahi Shop No111, BRAC Shopping Centre, Faidabad, Azampur, Uttara, Dhaka 1247, Rokeya Sarani, Near Mirpur10, Mirpur, Dhaka Plot No05, Rana Bhola Road, Sector10, Uttara, Dhaka 25, Kali Sankar Guha Road, Notun Bazar, Mymensingh Kashimpur, Nawabganj, Bandura, (Nearer to Upazila Parisad), Dhaka Feni Road, Chaumuhani, Noakhali 42/1Kha, Segunbagicha, Ramna, Dhaka Ka/12, Kalachandpur, Baridhara, Gulshan, Dhaka Best Chowdhury Plaza, Amirabad, Lohagara, Chittagong SA Plot No193, (Near to Fantasy Kingdoom) Diakhali, Jamgora, Ashulia, Dhaka MDC Square, Chawkbazar, Chittagong Osmani Shopping Center, Doyamir Bazar,Balaganj, Sylhet Live Date 16May11 16May11 17May11 23May11 29May11 1Jun11 2Jun11 2Jun11 2Jun11 6Jun11 14Jun11 18Jun11 27Jun11 29Jun11 4Jul11 4Jul11 21Jul11 24Jul11 24Jul11 24Jul11 25Jul11 25Jul11 30Jul11 30Jul11 30Jul11 31Jul11 31Jul11 31Jul11 31Jul11 31Jul11 3Aug11 3Aug11 17Aug11 23Aug11 25Aug11 25Aug11 25Aug11 25Aug11 7Sep11 9Sep11 19Sep11 20Sep11 26Sep11 2Oct11 2Oct11 11Oct11 18Oct11 25Oct11 26Oct11 20Nov11 22Nov11 23Nov11 23Nov11 23Nov11 24Nov11 30Nov11 30Nov11 Annual Report

218 ATM Network ATM Name Sutrapur Bandar Rampura Tongi Dhanmondi Gulshan Link Dakkhin khan Sutrapur(RM Das) Jatrabari Lalmatia Rupnagar Sandwip Sutrapur Comilla Gulshan Banani New Elephant Road Ring Road Adabar Bazar Darus Salam Station Nikunja2 Simanta Square Gopibagh Tejturi Bazar Nazim Uddin Road Bashundhara city Sony Cinema South Basabo Shahjahanpur Lake Drive Road Lucas More Sadar Road Medda Bazar Doylar More NICVD PC Culture Housing Society Narinda Naz Garden Comilla Nawabpur EPZ Kakrail Uttara Dhanmondi Gulshan Uttara Nawabpur Principal Dhanmondi Mirpur Sandwip Principal Comilla Mohakhali Gulshan New Elephant Road Shyamoli Shyamoli Shyamoli Progoti Sharani New Elephant Road Principal Karwan Bazar Imamganj Karwan Bazar Mirpur Motijheel Motijheel Uttara Karwan Bazar Barisal Brahmanbaria Naogaon Shyamoli Shyamoli North South Road Bogra Comilla Training Academy New Elephant Road Malibagh Chowdhury Para Malibagh Satmosjid Road Dhanmondi West Panthapath Asad Avenue Cox's Bazar Mirpur BRTA Bonosree Main Road Hobigonj Middle Badda Rayer Bazar East Dargahgate Comilla Road Mohakhali Rupgonj RFL South Gulshan (Gulshan1) New Senpara Road Siddheswari Road ATM Branch Name Karwan Bazar Shyamoli Cox's Bazar Rokeya Sharani Malibagh Hobigonj Progoti Sharani Dhanmondi Dargahgate Chandpur Mohakhali Madhubdi Gulshan Rangpur Malibagh ATM Booth Address No95/4, Distillery Road, Sutrapur, Dhaka RSA Complex, South Halishahar, BS Plot No8098, Bandar, Chittagong City Corporation Holding No1, East Rampura, Dhaka Sena Kalyan Commercial Complex, Plot No. 9/F, Tongi, Gazipur BlockC, Plot251/F, Road22, Plot60/A (New), Road12/A (New), Dhanmondi R/A, Dhaka TA137/1, Gulshan Link Road, Dhaka House12, Ward4, Dakkhin Khan, Dhaka Holding No108, R M Das Road, Sutrapur, Dhaka Holding No102/1, Sahid Faruk Road, South Jatrabari, Dhaka House#B/20, BlockE, Zakir Hossain Road, Lalmatia, Dhaka House#57, Road#22, Rupnagar R/A, Mirpur, Dhaka Sandwip City Centre, Haramiah, Sandwip, DistrictChittagong 29/5 K.M Das Lane, Sutrapur, Dhaka. SA Plot No634, Shashangacha, Badsha Miar Bazar, Kowtali, Comilla BlockB, House50, Road3 Avenue Road1, Niketan, Gulshan1 House50, Road11, BlockC, Banani, Dhaka House234/1, New Elephant Road, Dhaka KPBL Chayapath, House No.16/A/6, Ring Road, Mohammadpur, Dhaka House32/1/A North Adabar, Mohammadpur, Dhaka 59/D, Darus Salam, Mirpur Road, Dhaka Plot No06, Road No01, Nikunja02, Dhaka Simanta Square Market Premises, Pilkhana, Dhaka 1/A Gopibagh, 1st Lane, Dhaka East Tejturi Bazar, Farmgate, Dhaka /2 Nazim Uddin Road, Dhaka Bashundhara city, Panthapath, Level7, Dhaka Crescent Homes, 150/1 Shah Ali bag Mirpur1, Dhaka 445, Sabujbagh, South Basabo, Sabujbagh, Dhaka 714/1, Uttar Shahjahanpur, Dhaka Plot No19, Lake Drive Road, Sector07 Uttara, Dhaka 115 West Nakhalpara, Tejgaon, Dhaka 45, Sadar Road, Barisal Municipal Holding No345/338, Medda Bazar, Brahmanbaria Muncipal Holding No1952, Chawk Enayet, Naogaon NICVD, ShereBangla Nagar, Dhaka House23, Road10, BlockKha, PC Culture Housing Society, Mohammadpur, Dhaka 98/1, Bhagabath Shah Sanka Nidhi Lane, Narinda Road, Gandaria, Dhaka Plot No1668, Hotel Naz Garden, Selimpur, Bogra 333, Jhawtala, Comilla 719 (old) Satmasjid Road, 85/A (New) M R Akhter Mukul Sarak, Dhanmondi R/A, Dhaka 577, Malibagh Chowdhury Para, Dhaka Block E, Plot No Gha/13, Mohammadpur Housing Estate, Mohammadpur, Dhaka 20/3, North Dhanmondi (old), Bir Uttam Kazi Nuruzzaman Sarak (New), West Panthapath, Dhaka1205 Mohammadpur Housing Estate Plot71/C, BlockD, Mohammadpur, Dhaka Digonta Complex (New Market), Bazar Ghata, Cox's Bazar Plot30, Main Road01, Section10, Mirpur, Dhaka B/4, Block#B, Main Road, Bonosree, Dhaka Sayestagonj Main Road, Hobigonj Gha131/1, Middle Badda, Dhaka 15, Sultangonj, Rayer Bazar, Dhaka 5222, East Dargahgate, Sylhet 56, Comilla Road, Chandpur G37, Wireless Gate, Dhaka Rangpur Metal Industries Ltd, Murapara, Rupgonj, Narayangonj Shop15, 50, Gulshan South, Dhaka House 5543, Road 1, New Senpara Road, Grand Hotel More, Rangpur Total Camelia Point, 49, Siddheswari Road, Dhaka Live Date 8Dec11 13Dec11 14Dec11 14Dec11 15Dec11 20Dec11 20Dec11 22Dec11 27Dec11 27Dec11 27Dec11 27Dec11 28Dec11 28Dec11 29Dec11 12Feb12 16Feb12 16Feb12 19Feb12 19Feb12 22Feb12 23Feb12 26Feb12 29Feb12 1Mar12 21Mar12 26Apr12 7May12 9May12 16May12 24May12 29May12 30May12 30May12 3Jun12 14Jun12 9Jul12 15Jul12 30Jul12 31Jul12 10Sep12 1Oct12 15Nov12 20Nov12 6Dec12 13Dec12 23Dec12 30Dec12 27Jan13 28Jan13 28Jan13 29Jan13 6Mar13 8Oct13 1Dec13 15Jan14 27Jan14 Annual Report

219 SME Centers SL No Dhaka Region Branch Name Address Date of Opening Principal Branch SME Center Islampur SME Center Kakrail SME Center New Elephant Road SME Center 3031, Dilkusha C/A, Dhaka 3839, Islampur, Dhaka 81, VIP Road, Dhaka 1000 Novera Square, House 05, Road 02, Dhanmondi, Dhaka Mar09 30Mar09 30Apr09 Chittagong Region 1 Agrabad SME Center 2 Anderkilla SME Center 3 CDA Avenue SME Center 4 Jubilee Road SME Center BCIC Sadan, 26, Agrabad C/A, Chittagong K.M.C. Tower (1st Floor), 133, Anderkilla, Chittagong BMA Bhaban (Ground Floor), 1367 CDA Avenue, East Nasirabad, Chittagong 175, Jubilee Road, Enayet Bazar, Chittagong 30Dec09 30Dec09 30Dec09 30Dec09 Sylhet Region 1 Garden Tower SME Center Biswa Road, Shahjalal Uposhohor Point, Sylhet Apr09 Khulna Region 1 Khulna SME Center Mollick Shopping Complex Limited, 99 Khan A Sabur Road, Khulna 20Dec09 Rajshahi Region 1 Bogra SME Center 324, Kazi Nazrul Islam Sarak, Jhawtala, Bogra 20Jul09 Annual Report

220 NOTES

221 I/We... of being a Member of do hereby appoint Mr./Mrs.... of... as my/our proxy to attend and vote on my/our behalf at the ExtraOrdinary General Meeting (EGM) and the 32nd Annual General Meeting (AGM) of the Company to be held on 21st April, 2014 at 9:00 a.m. and 9:15 a.m. respectively and at any adjournment thereof. As witness my/our hand this... day of Signature of the Shareholder(s) No. of Shares Held... Folio No. or BO ID No. Signature of the Proxy Revenue Stamp Tk Note : A Member entitled to attend and vote at the Extraordinary General Meeting / Annual General Meeting may appoint a proxy to attend and vote on his/her behalf. The Proxy Form, duly stamped, must be deposited at the Corporate Head Office of the Bank at least 48 hours before the time fixed for meeting. Signature Verified Proxy Regn. No.... Authorized Signatory Proxy Regn. No.... I/We hereby record my/our attendance at the ExtraOrdinary General Meeting (EGM) and the 32nd Annual General Meeting (AGM) being held today, the April 21, 2014 (Monday) at 9:00 am and 9:15 am respectively at Bashundhara Convention Centre2, BlockC, Umme Kulsum Road, Bashundhara R/A, Baridhara, Dhaka. Name of the Shareholder(s) (in Block Letter) No. of Shares Folio No. BO ID No. Name of the Proxy (if any) Signature of Shareholder(s) / Proxy Signature verified by Note: Please present this slip at the Reception Desk. Children and NonShareholders will not be allowed at the meeting. Annual Report

222 NOTICE OF THE EXTRAORDINARY GENERAL MEETING Notice is hereby given that an ExtraOrdinary General Meeting (EGM) of AB Bank Limited will be held on April 21, 2014 (Monday) at 9:00 am at Bashundhara Convention Centre2, BlockC, Umme Kulsum Road, Bashundhara R/A, Baridhara, Dhaka to transact the following: The following Special Resolution to be placed for consideration and approval of the Members of the Company: Resolved that consent for issuance of AB Bank Subordinated Bond up to BDT crore for TierII Capital subject to approval of the concerned Regulatory Authorities. Dated: March 14, 2014 By order of the Board Sd/ Company Secretary NOTE: 1. `Record Date is 25th March, 2014 (Tuesday). Shareholders names appearing in the Share Register of the Company or in the Depository on the Record Date will be eligible to attend the meeting. 2. A Member entitled to attend and vote at the above EGM can appoint a proxy to attend and on a poll to vote on his/her behalf. Form of Proxy duly stamped must be deposited at the Company s Registered Office not later than forty eight hours before the time fixed for the meeting and in default, Form of Proxy will not be treated as valid.

223 Corporate Profile Name of the Company (ABBL) Legal Form Public Limited Company Date of Incorporation 31st December 1981 Commencement of Business 27th February 1982 Registered Office BCIC Bhaban, 3031, Dilkusha C/A Dhaka 1000, Bangladesh GPO Box: 3522 Telephone: (+8802) Telefax: (+8802) SWIFT Code: ABBLBDDH Web Page: Dhaka Regional Office01 BSEC Bhaban 102 Kazi Nazrul Islam Avenue Dhaka 1215 Tel: (+8802) , , Dhaka Regional Office02 House 11, Road 14D Sector 4, Uttara, Dhaka Tel: (+8802) , , Fax: (+8802) Chittagong Regional Office01 Spensers Building, 26 Agrabad C/A, Chittagong Tel: (+88031) , Fax: (+88031) Chittagong Regional Office02 395, Khatunganj, Chittagong Tel: (+88031) , Fax: (+88031) Sylhet Regional Office Garden Tower Biswa Road, Shahjalal Uposhohor Point Sylhet 3100 Tel: ( ) , Fax: ( ) Khulna Regional Office Mollick Shopping Complex Limited 99 Khan A Sabur Road, Khulna Tel: (+88041) , , Fax: (+88041) [email protected] Rajshahi Regional Office Shaheb Bazar, Rajshahi Tel: ( ) , Fax: ( ) [email protected], Islami Banking Branch 82, Kakrail, Ramna, Dhaka Tel: (+8802) , 37, 38 Fax: (+8802) [email protected] Custodian Services BCIC Bhaban (7th Floor) 3031, Dilkusha C/A Dhaka 1000, Bangladesh Tel: (+8802) , , Fax: (+8802) SWIFT: ABBLBDDH005 [email protected] Offshore Banking Unit (OBU) Bay Shopping Centre, P.O. EPZ South Halishahar, P.S. Bandar, Chittagong Tel: (+88031) Fax: (+88031) OVERSEAS BRANCH Mumbai Branch Liberty Building 4142, Sir Vithaldas Thackersey Marg, New Marine Lines, Mumbai , India Tel: (+91) (22) Fax: (+91) (22) SWIFT: ABBLINBB [email protected] SUBSIDIARY COMPANIES AB International Finance Ltd. Hong Kong Unit 1201B, 12/F, Admiralty Centre Tower One, 18 Harcourt Road, Hong Kong Tel: (+852) SWIFT: ABFLNKHH [email protected] [email protected] AB Exchange (UK) Ltd. 69 Whitechapel High Street London E 1 7PL Tel: +44 (0) Fax: +44 (0) [email protected] AB Investment Limited (ABIL) WW Tower (7th Floor) 68 Motijheel C/A Dhaka 1000, Bangladesh Tel: (+8802) , , Fax: (+8802) [email protected] AB Securities Limited (ABSL) WW Tower (7th Floor) 68 Motijheel C/A Dhaka 1000, Bangladesh Tel: (+8802) , , Fax: (+8802) [email protected] CashLink Bangladesh Limited (CBL) BCIC Bhaban (9th Floor) 3031, Dilkusha C/A, Dhaka 1000 Tel: (+8802) Fax: (+8802) Arab Bangladesh Bank Foundation (ABBF) BCIC Bhaban (9th Floor) 3031, Dilkusha C/A Dhaka 1000, Bangladesh Tel: (+8802) Fax: (+8802) [email protected] Authorized Capital: Tk. 600 crore Paidup Capital: Tk. 498 crore Number of Shareholders: 107,044 (Record Date: ) Total Manpower: 2,179 Number of Branches: 89 Number of SME Centers: 11 Total Asset: Tk. 20,801 crore Earnings per Share (EPS): Tk Net Asset Value Per Share: Tk Market Capitalization: Tk. 1,304 crore For any Clarification on this Report Please Write to: The Company Secretary Head Office AB Bank Ltd Dilkusha C/A, Dhaka1000 Auditors ACNABIN Chartered Accountants Rating Agency Credit Rating Agency of Bangladesh (CRAB)

224 Corporate Office: BCIC Bhaban, 3031 Dilkusha C/A Dhaka 1000, Bangladesh,